Karachi, April 16, 2025: The Pakistan Software Houses Association (P@SHA) has urged the federal government to extend the Final Tax Regime (FTR) for the IT and IT-enabled services (ITeS) sector for another 10 years, emphasizing its critical role in maintaining growth momentum, attracting foreign investment, and supporting Pakistan’s digital economy.
In a statement issued on Wednesday, Sajjad Mustafa Syed, Chairman of P@SHA, said that the association, through an inclusive consultation process with IT companies and exporters, has submitted detailed proposals for the 2025–26 Federal Budget. A major recommendation is the continuation of the current FTR for IT and ITeS exports — currently valid until June 30, 2026 — to be extended through 2035.
P@SHA believes that predictability and consistency in taxation are essential to sustaining investor confidence and helping the IT sector thrive. The FTR enables IT exporters registered with the Pakistan Software Export Board (PSEB) to benefit from a reduced 0.25 percent withholding tax on export proceeds. According to P@SHA, continuing this regime is vital for export-led growth, employment generation, and industrial development.
Chairman P@SHA explained that the proposed 10-year extension would align Pakistan with regional economies that offer long-term tax incentives to attract foreign direct investment (FDI). He emphasized that the IT sector requires a stable fiscal framework to remain globally competitive and to accelerate operational expansion and export diversification.
P@SHA also highlighted challenges posed by disparities in the tax burden between salaried employees and remote freelancers. Salaried IT professionals currently face an income tax rate of 5 to 35 percent, whereas remote workers are taxed at significantly lower rates of 0.25 to 1 percent. This imbalance, the association warned, contributes to talent migration and brain drain. Reducing taxes on salaried IT employees, P@SHA suggested, would enhance workforce retention and unlock the industry’s full potential.
Additionally, P@SHA’s proposals stress the importance of enabling smooth foreign exchange repatriation. The association has recommended that payments for services made through Exporters’ Special Foreign Currency Accounts (ESFCA) be exempt from withholding tax. Under the current Income Tax Ordinance (ITO) 2001, such payments to non-residents often attract a 15 percent WHT — a deterrent for global partnerships and inward investment. Removing this tax, P@SHA argues, would strengthen the incentive to repatriate export earnings through formal banking channels.
P@SHA emphasized that its recommendations are in line with the objectives of the Special Investment Facilitation Council (SIFC) and the Prime Minister’s vision for exponential IT export growth. By extending the Final Tax Regime, offering equitable tax structures, and easing foreign exchange regulations, the government can empower Pakistan’s IT sector to emerge as a regional technology powerhouse.
With P@SHA continuing to advocate for progressive policy reforms, its active engagement with stakeholders is expected to play a pivotal role in shaping the country’s digital and economic future.