Tax on IT Sector in Pakistan 

Over the recent years, the Government of Pakistan has realized the need and importance of the IT sector to boost the economic progress in the Country. Numerous Software houses, Call Centres and other IT businesses are being registered day by day to export IT services in Pakistan. According to a recent report of the State Bank of Pakistan, the US 4.2 Billion dollars in three (2) quarters for the year 2023 on account of the Export of IT services was received in Pakistan by IT sector businesses. USD 813 Million dollars in this was only received on account of export-related to computer and information services by IT businesses in Pakistan.

The government of Pakistan to promote Export of IT Services had previously declared complete Income Tax exemption on amounts received on account of Export services in Pakistan till the year 2025. But Certain Amendments were made in the Income Tax Ordinance through Finance Act 2022

Taxation on IT Sector, Tax Year 2022-23

Export of software/ IT services/ IT enabled services is now subject to 0.25% of export proceeds subject to fulfillment of the following conditions:

• Registration with PSEB
• Annual tax return has been filed;
• Withholding statements have been filed;
• Sales tax returns for Federal & Provincial tax authorities (whichever is applicable) have been filed.

In case condition “a” i.e. PSEB registration is not fulfilled, tax deduction rate will be 1% but would still be Final Tax Regime (FTR).

If any of the conditions from “b” to “d” are not met than the person goes under Normal Tax Regime (NTR).

NTR means the following taxation become applicable:

Small Company: Tax liability is higher of following under NTR:

• 20% of taxable income
• 17% of accounting income
• 1.25% of turnover

Other than Small Companies: Tax liability is higher of the following under NTR:

• 29% of taxable income
• 17% of accounting income
• 1.25% of turnover

Individual/AOP with more than Rs.100 million gross sales/ revenue/ turnover in any year 2017 and onwards: Tax liability is higher of following:

• % of taxable income as per slab rates – highest slab is 35% – please check table at the end of this document for complete slab rates
• 1.25% of turnover

Individual/AOP with less than Rs.100 million gross sales/ revenue/ turnover:

 Tax liability is % of taxable income as per slab rates – highest slab is 35% – please check table at the end of this document for complete slab rates.