P @SHA has called for the continuation of the Final Tax Regime (FTR) for IT and IT-enabled services exports beyond its scheduled expiration date of June 30, 2026. P@SHA Chairman Sajjad Mustafa Syed emphasized that the extension of FTR is essential to sustaining export growth, attracting foreign direct investment, and ensuring long-term policy stability for Pakistan’s thriving IT industry.
As part of its broader budgetary proposals for the Federal Budget 2025-26, P@SHA has submitted detailed recommendations to relevant ministries and institutions. The association has urged policymakers to prioritize industry growth, employment generation, and export expansion by maintaining favorable taxation policies for IT exporters. The existing FTR framework provides a significantly reduced withholding tax rate of just 0.25% on export proceeds for IT firms registered with PSEB. Syed highlighted that this incentive has been instrumental in accelerating Pakistan’s IT exports and creating an enabling environment for investment.
P@SHA has proposed that the Final Tax Regime be extended for at least ten years to provide long-term predictability for businesses and investors. The IT industry is currently experiencing rapid expansion, with Pakistani companies attracting global investment and diversifying their presence in international markets. Syed stressed that tax policy stability would encourage reinvestment into the sector, fueling further innovation and digital transformation.
He further explained that countries competing with Pakistan in the IT space, such as India, the Philippines, and Bangladesh, offer long-term tax exemptions to encourage foreign investment. If Pakistan hopes to maintain its competitive edge, it must ensure that taxation policies are aligned with global best practices. The continuation of FTR will simplify tax structures for IT firms and provide greater financial flexibility for business expansion.
P@SHA’s recommendations also focus on addressing income tax disparities between salaried IT employees and remote workers. The current tax structure imposes higher tax rates on salaried IT professionals, ranging between 5% and 35%, compared to remote workers who are subject to significantly lower rates of 0.25% to 1%. This discrepancy, according to Syed, is contributing to brain drain, as skilled professionals opt for international job opportunities where tax burdens are lower. He urged the government to introduce tax relief measures for salaried IT professionals to improve talent retention within the country.
Another critical recommendation from P@SHA pertains to the repatriation of foreign exchange earnings. Under Pakistan’s current tax laws, payments made to non-residents for services rendered in the country are subject to high withholding taxes, often at a rate of 15% for technical services and royalties. These withholding tax obligations create financial inefficiencies for IT exporters, discouraging them from bringing earnings back into the country.
To address this challenge, P@SHA has proposed that payments made from Exporters’ Special Foreign Currency Accounts (ESFCA) should be exempt from withholding tax. Such an exemption would encourage Pakistani IT firms to repatriate funds into the country, improving liquidity and overall economic stability. The proposal aligns with broader government objectives under the Special Investment Facilitation Council (SIFC) and the Prime Minister’s vision of exponential IT export growth.
With Pakistan’s IT sector poised for continued expansion, industry stakeholders stress that consistent and business-friendly tax policies are crucial for maintaining momentum. The extension of the Final Tax Regime, coupled with a reduced tax burden on salaried professionals and improved foreign exchange policies, could pave the way for unprecedented growth in Pakistan’s digital economy. The government’s response to these proposals in the upcoming budget will be a decisive factor in shaping the future of the IT sector.
