The Pakistan Software Houses Association (P@SHA) has called on the government to reinstate a 10-year tax exemption under the Final Tax Regime (FTR) for IT and IT-enabled services (ITeS) exports.
This move aims to ensure predictability, continuity, and investor confidence in the rapidly growing IT industry. As the IT industry continues to attract major investments, expand operations, and diversify its regional export markets, policy consistency remains crucial for sustaining momentum.
The FTR currently allows for a reduced withholding tax rate of 0.25% on export proceeds for entities registered with the Pakistan Software Export Board (PSEB) until its expiration on June 30, 2026. P@SHA emphasizes that the extension of the FTR is vital to sustaining export growth, fostering investment, and maintaining the competitiveness of Pakistan’s IT industry on the global stage.
A 10-year tax exemption would accelerate digital transformation, enhance investor confidence, and solidify Pakistan’s position as a leading IT hub. This aligns with the objectives of the Special Investment Facilitation Council (SIFC) and the prime minister’s vision for exponential IT export growth. By ensuring a stable tax regime, the IT industry can continue expanding and driving economic progress.
The continuation of the FTR would simplify tax structures for IT firms and encourage reinvestment by allowing companies to retain more revenue for business expansion and technological innovation. Furthermore, providing long-term tax incentives and maintaining policy stability is essential to fostering a favorable business environment for the IT industry.
P@SHA Chairman Sajjad Mustafa Syed highlighted that reinstating the FTR would align Pakistan with regional competitors offering extended tax incentives to attract foreign direct investment (FDI). He stressed that the IT industry requires stability and consistency to maintain global competitiveness, boost exports, and generate employment opportunities.
He also pointed out taxation disparities, where salaried employees pay between 5% and 35% in income tax, while remote IT workers pay only 0.25% to 1%. This gap contributes to talent migration and makes it difficult for local firms to retain skilled professionals. To unlock the industry’s full potential, he urged the government to lower income tax rates for salaried IT employees.
One of P@SHA’s key recommendations is to facilitate foreign exchange repatriation. Under the current Income Tax Ordinance (ITO), 2001, payments made to non-residents for services rendered in Pakistan are subject to withholding tax (WHT), which varies based on the nature of the payment and existing Double Taxation Agreements (DTAs). Royalties and fees for technical services paid to non-residents without a permanent establishment in Pakistan currently incur a 15% withholding tax.
Saad Shah, CEO of Hexalyze and an IT exporter, urged the government to allocate budgetary support for IT-exporting companies seeking to expand into emerging and high-potential markets such as Saudi Arabia, the UAE, Qatar, and Singapore. These countries are heavily investing in IT sectors, including AI, robotics, cybersecurity, and fintech, offering significant opportunities for Pakistani service providers.
Pakistani IT exporters have already showcased their products and services in these markets, receiving an encouraging response. Shah emphasized that government support through enhanced trade relations at the state level—via the Ministry of Information Technology and Telecommunication (MoITT), the Pakistan Software Export Board, economic attachés, and diplomatic missions—would be crucial for promoting the IT industry, increasing exports, and attracting further investment.