Federal Government Extends 0.25% Withholding Tax on IT Exports Until 2029

In a major boost for Pakistan’s rapidly growing information technology sector, the Federal Government has announced the extension of the concessionary withholding tax rate of 0.25% on export proceeds of Information Technology (IT) and IT-enabled Services (ITeS) until Tax Year 2029 under the Finance Bill 2026-27.

The reduced tax rate, which was previously scheduled to expire in Tax Year 2026, will now remain in effect for an additional three years, providing long-term fiscal certainty to technology exporters, freelancers, and digital service providers across the country.

Federal Government Extends 0.25% Withholding Tax on IT Exports Until 2029

Under the Income Tax Ordinance, 2001, exporters of IT and IT-enabled services have been benefiting from a significantly reduced withholding tax rate of 0.25% on foreign exchange remittances received from exports. The incentive was originally introduced to strengthen Pakistan’s IT export industry, encourage technology businesses to register with the Federal Board of Revenue (FBR), and facilitate the formalization of freelance and digital service activities without imposing a substantial tax burden.

The extension of the concessionary regime is expected to support continued growth in Pakistan’s digital economy and enhance the country’s competitiveness in international technology markets.

According to Waheed Shahzad Butt, Chairman of the LTBA Public Interest Litigation Committee, the decision carries several strategic benefits for the sector. He noted that technology companies and freelance exporters will now be able to undertake long-term planning with greater confidence, free from the uncertainty associated with annual policy reviews.

He further highlighted that Pakistan has witnessed consistent year-on-year growth in IT export revenues, and the continuation of the preferential tax rate is likely to accelerate foreign exchange inflows from the technology sector. The measure is also expected to encourage more freelancers and small technology enterprises to register with the FBR and channel their earnings through formal banking systems.

See Also: IT Ministry Proposes Tax Relief for Telecom Sector to Boost Investment

“Maintaining a near-zero effective tax burden on IT exports ensures that Pakistan remains competitive with regional technology hubs and continues to attract investment and talent within the digital economy,” Butt stated.

Through amendments introduced in the Finance Bill 2026-27, the government has revised the relevant provisions of the Income Tax Ordinance, 2001, extending the sunset clause governing the reduced withholding tax rate from Tax Year 2026 to Tax Year 2029.

As a result, eligible IT and ITeS exporters will continue to enjoy the 0.25% withholding tax rate on export remittances received in foreign exchange during Tax Years 2027, 2028, and 2029.

Industry stakeholders have welcomed the move, viewing it as a positive step toward sustaining export growth, promoting documentation of the digital economy, and strengthening Pakistan’s position as an emerging technology and outsourcing destination.