Updated Income Tax Ordinance sets criteria for technology-driven businesses and other FBR-specified enterprises
ISLAMABAD: The Federal Board of Revenue (FBR) has defined the term “startup” for tax purposes for Tax Year 2027 under the Income Tax Ordinance, 2001.
The FBR has issued the updated Income Tax Ordinance, 2001, incorporating amendments up to June 30, 2026, which sets out the criteria for a business to qualify as a startup under Pakistan’s tax law.
Technology-driven businesses qualify
According to the updated law, a startup includes a business operated by a resident individual, Association of Persons (AOP) or company that commenced on or after July 1, 2012.
The business must be engaged in, or intend to offer, technology-driven products or services to any sector of the economy.
In addition, the person must be registered with and duly certified by the Pakistan Software Export Board (PSEB).
Another key condition is that the business must have recorded an annual turnover of less than Rs100 million in each of the last five tax years.
Businesses seeking startup status for tax purposes will therefore need to meet the prescribed requirements relating to their commencement date, technology-driven activities, PSEB registration and turnover.
FBR can specify other startups
The definition also gives the FBR authority to include other businesses or classes of persons within the scope of startups.
Under the provision, any business of a person or class of persons may qualify as a startup if it meets conditions specified by the FBR with the approval of the Federal Minister in charge.
Such conditions must be prescribed through a notification published in the official Gazette.
This provision allows the tax authorities to expand the scope of the startup definition beyond technology-driven businesses where the prescribed approval and notification requirements are fulfilled.
Startup status for tax year 2027
The updated Income Tax Ordinance provides the legal framework for determining whether a business qualifies as a startup for Tax Year 2027.
Technology-focused businesses that meet the prescribed conditions should assess their eligibility based on their date of commencement, PSEB certification and turnover history.