The Ministry of Information Technology and Telecommunication has released a comprehensive summary of the wins it secured for Pakistan’s technology ecosystem in the Finance Bill 2026-27, covering the IT and IT-enabled services sector, telecom and digital infrastructure, the startup and venture capital ecosystem, and broad-based business incentives. The measures collectively represent one of the most technology-focused budget outcomes in Pakistan’s recent fiscal history, reflecting the ministry’s sustained advocacy over the months leading up to the budget presentation on June 12, 2026.
For the IT and IT-enabled services sector, the headline win is the extension of the 0.25 percent concessionary tax rate on IT and IT-enabled services exports, now locked in through 2029, making it the most favourable rate in the region and directly addressing the industry’s longstanding concern about policy uncertainty. The advance tax on foreign card payment transactions has been reduced by 90 percent, from 5 percent to 0.5 percent, directly reducing the cost burden on freelancers, remote workers, and digital businesses receiving international payments through platforms and payment cards. Income tax relief for salaried individuals in the IT and IT-enabled services sector has also been introduced to support talent retention and improve affordability for the growing professional workforce in the technology industry. A 10 percent tax credit for Federal Board of Revenue system integration has been included alongside continuation of Section 65F Technology Tax Credit, providing further incentives for technology companies that invest in formalising and digitising their operational infrastructure.
On the telecom and digital infrastructure side, zero customs duty on submarine cable landing station equipment has been extended, removing a significant cost barrier for the international connectivity infrastructure investments needed to support Pakistan’s growing digital economy and 5G rollout. The advance tax on SIM card sales under Section 236CA has been eliminated, reducing the cost of mobile connectivity for consumers and operators alike. Zero customs duty on completely knocked-down and semi-knocked-down mobile phone components has been maintained to support local handset assembly and manufacturing. The National Telecommunication Corporation has been exempted from Section 153 withholding tax, a targeted relief for a critical government infrastructure institution. A 5 percent concessionary duty on machinery for certified internet service providers and zero duty on raw materials for SIM and smart card manufacturers round out the telecom measures.
For Pakistan’s startup and venture capital ecosystem, Clause 43F introduces an exemption from Section 153 withholding tax for startups, removing a cash flow constraint that has historically made it harder for early-stage companies to manage working capital during growth phases. The restoration of tax pass-through treatment for venture capital funds under Clause 57(2) is a particularly significant structural reform, correcting a distortion that had made Pakistan’s venture capital vehicles less attractive compared to similar structures in peer markets. Super Tax rationalisation, which reduces the rate from 10 percent to 8 percent for companies above Rs 500 million in income while abolishing it entirely for companies below Rs 500 million, provides broad relief across the business community. The abolishment of Capital Value Tax on foreign assets removes a levy that had been a persistent point of friction for overseas Pakistanis and foreign investors considering bringing capital into Pakistan’s digital economy, and the duty on feature phone components has also been abolished, further supporting mobile device affordability at the lower end of the market.
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