Sajjad Mustafa Syed, Chairman of P@SHA, has strongly advocated for the continuation of FTR for the country’s IT and ITeS sector. This demand, built on extensive consultations with IT companies and exporters across the country, urges the government to extend the current FTR framework for a further 10 years—from 2025 to 2035. As it stands, the existing FTR is scheduled to expire on June 30, 2026.
FTR offers a reduced withholding tax rate of 0.25 percent on export proceeds for companies registered with PSEB. According to P@SHA, the continuation of this framework is not just desirable but essential for sustaining the current trajectory of export growth, attracting FDI, and maintaining Pakistan’s competitiveness in global technology markets. The association has submitted comprehensive budgetary proposals and policy recommendations to relevant ministries and allied institutions, focusing on economic development through FDI, job creation, and IT sector advancement.
Sajjad Mustafa Syed emphasized that the IT industry is currently experiencing a wave of positive momentum, marked by expanding operations, increased investor interest, and the diversification of export markets across various regions. In this context, he argued, a predictable and simplified tax regime is vital to foster investor confidence, promote reinvestment, and fuel technological innovation. He noted that long-term tax incentives have become a standard offering by Pakistan’s regional competitors, making it imperative for the country to adopt a similar stance to remain attractive for international tech investors.
He further highlighted that the FTR’s continuation will allow exporters to retain more earnings, enabling them to channel funds into scaling operations, research and development, and capacity building. In turn, this would strengthen Pakistan’s position as an emerging tech powerhouse and accelerate the country’s broader digital transformation goals. Sajjad also urged consistency in government policy, warning that frequent changes to tax regimes create uncertainty that deters both local entrepreneurs and foreign stakeholders.
Another key point raised by the P@SHA Chairman relates to income tax disparities within the sector. He pointed out that salaried IT professionals currently fall under income tax slabs ranging from 5 to 35 percent, while freelancers and remote workers pay a significantly lower rate between 0.25 and 1 percent. This imbalance, he argued, contributes to talent migration and the ongoing brain drain, making it increasingly difficult for domestic firms to retain skilled human capital. To remedy this, P@SHA has proposed a substantial reduction in income tax rates for salaried employees within registered IT companies to ensure a level playing field and incentivize local employment.
Additionally, P@SHA has called for major reforms in how foreign service payments are taxed under Pakistan’s existing legal framework. According to the current Income Tax Ordinance of 2001, payments made to non-residents for services rendered in Pakistan are subject to withholding tax, which can vary depending on the nature of the service and the country’s Double Taxation Agreements (DTAs). In many cases, such as with royalties and fees for technical services, a 15 percent withholding tax applies. P@SHA believes this rate is unreasonably high and discourages companies from bringing in foreign expertise or collaborating with overseas vendors.
To address this, the association has proposed a targeted exemption from withholding tax for payments made from Exporters’ Special Foreign Currency Accounts (ESFCA) to non-residents for services rendered. This move would apply to all IT service categories and is expected to encourage companies to repatriate more funds into Pakistan, thereby improving foreign exchange inflows and supporting the rupee’s stability.
The industry body’s latest proposals underscore the urgency of comprehensive policy support to unlock the full potential of Pakistan’s IT sector. As the government prepares to finalize its budget for the upcoming fiscal year, stakeholders across the tech ecosystem will be watching closely to see whether these recommendations translate into actionable reforms that could help the country chart a path toward sustainable digital growth and economic resilience.
