Karachi, May 20, 2025 — The Pakistan Software Houses Association (P@SHA) has strongly recommended that the government exempt debit card transactions from withholding tax in the upcoming 2025-26 federal budget.
The proposal targets the relief of IT exporters, particularly those utilizing corporate debit cards linked to Exporters’ Special Foreign Currency Accounts (ESFCAs).
In its detailed tax recommendations for the next fiscal year, P@SHA emphasized that the current taxation structure unfairly burdens IT companies. These companies, already operating under a 0.25% Final Tax Regime (FTR) on export proceeds, are subject to an additional 5% withholding tax on every corporate debit card transaction made from ESFCAs.
“This policy results in double taxation and actively discourages the legitimate use of foreign currency accounts,” the association stated, urging the Ministry of Finance and FBR to revise the existing framework.
P@SHA highlighted that removing the 5% tax on debit card usage would not only eliminate redundancy but also encourage broader adoption of ESFCAs by IT firms. These accounts are vital for managing international transactions efficiently, especially as the sector grows its footprint globally.
Additionally, the association raised concerns over the rising costs and additional withholding taxes imposed on foreign currency debit cards, which are essential tools for global payments and purchases. According to P@SHA, these debit card charges and taxes create barriers for IT exporters who rely on international vendors, platforms, and tools to maintain their competitive edge.
“Retention account holders already operate within a documented and regulated tax regime. Imposing further levies on their debit card transactions is both unjustified and counterproductive,” the statement read.
P@SHA has called for a complete exemption from withholding tax and other excessive fees on all ESFCA-linked debit cards, citing the need to simplify and incentivize transparent use of foreign currency earnings.
By addressing these issues, the government can support Pakistan’s IT export sector, encourage digital payment adoption, and enhance foreign exchange retention. P@SHA concluded its proposal with a strong appeal for pro-business reforms that ease operational bottlenecks and promote long-term industry growth.