MoITT Proposes Tax Reforms to Boost Pakistan’s IT & Tech Sector

In a written submission to the National Assembly, the Ministry of Information Technology and Telecom has proposed a series of reforms to boost economic growth in Pakistan. A key recommendation includes the categorization of ICT businesses as SMEs, making them eligible for tax incentives and simplified processes for business registration and tax filing. This categorization would improve efficiency and promote growth in the tech sector, according to the ministry.

In addition, MoiTT urged the State Bank of Pakistan (SBP) to set up facilitation desks for ICT companies at branches handling Export Special Foreign Currency Accounts (ESFCA). These desks would help streamline international transactions for tech businesses. The ministry also urged the SBP to allow 100% retention in ESFCA accounts and issue corporate debit cards to ease foreign payments.

The ministry also proposed tax exemptions on the import of essential IT hardware and software for exports. Likewise, another major suggestion encompassed a “Made in Pakistan” policy to promote local technology products.

Meanwhile, for freelancers, the ministry proposed a targeted tax relief. It advised reducing the current 1% final tax on income of freelancers to 0.25%, for those registered with PSEB. In addition, it called for exempting freelancers from monthly sales tax filing.

According to a credible source, the tax reforms were a focal point of the proposals. The ministry suggested that the Federal Board of Revenue (FBR) remove the 5% advance tax on debit cards tied to ESFCA accounts. It also asked for extending the existing 100% tax credit for startups registered with the Pakistan Software Export Board (PSEB) until 2030 and also sought exemptions on dividends and capital gains from IT startups.

Last but not least, the ministry called for a government-backed venture capital fund to support new businesses. It also suggested tax breaks for banks and venture capital firms to encourage lending in the tech sector. With these new measures, the ministry aims to solidify Pakistan’s position in the global tech market.

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