The Ministry of Information Technology and Telecom has unveiled a comprehensive set of proposals aimed at boosting Pakistan’s IT export potential and creating a more supportive business environment for startups, small and medium-sized enterprises (SMEs), and freelancers.
In a detailed submission to the National Assembly, the ministry highlighted the need to categorize the ICT sector as SMEs, advocating for streamlined tax benefits, facilitation desks in financial institutions, and simplified business registration and tax filing processes. These measures, the ministry asserts, could significantly enhance operational efficiencies and drive rapid growth in Pakistan’s technology sector.
Key proposals include tax exemptions on imports of IT hardware and software essential for exports and the introduction of a “Made in Pakistan” policy to promote locally manufactured technology products. The Ministry of IT has also recommended that the State Bank of Pakistan (SBP) bolster support for ICT startups and SMEs by setting up facilitation desks with trained staff at all branches managing Export Special Foreign Currency Accounts (ESFCA).
Additionally, the ministry urged the SBP to expedite the issuance of corporate ESFCA debit cards, allow 100% retention in ESFCA accounts, and develop a foreign exchange portal to streamline remittance flows.
These initiatives, according to the ministry, would enable Pakistan’s tech companies to manage international transactions more effectively. Tax reforms are another focal point, with the ministry proposing that the Federal Board of Revenue (FBR) eliminate the 5% advance tax on debit cards linked to ESFCA accounts and harmonize the definition of IT and IT-enabled services (ITeS) across federal and provincial levels.
The ministry also recommended extending the existing 100% tax credit for startups registered with the Pakistan Software Export Board (PSEB) to 2030.
Further recommendations include granting exemptions on dividends and capital gains from IT startups, exempting IT services from sales tax, and clarifying the final tax regime (FTR) for individuals using remittance services like Payoneer and Wise.
The ministry also called for targeted tax relief for freelancers, who currently benefit from a 1% final tax on income, which can be reduced to 0.25% if they are PSEB-registered. Recognizing the critical role of freelancers in reducing unemployment and increasing foreign remittances, the ministry suggested exempting them from monthly sales tax returns and registration.
These measures, the ministry argued, would make Pakistan’s business environment more conducive to freelance work, which is increasingly popular as more professionals seek flexible, high-paying international opportunities. To further encourage venture capital investment, the ministry proposed establishing a government-backed venture capital fund to provide financial support for SMEs, startups, and freelancers.
It also suggested offering tax breaks to banks and venture capital firms to stimulate lending within the IT sector, ensuring robust financial support for early-stage companies.
Finally, the Ministry of IT and Telecom stressed the importance of a balanced approach to taxation and support structures for IT companies and freelancers to prevent talent drain from domestic companies to freelance roles. By simplifying tax processes and creating user-friendly digital platforms for tax filing and compliance, the ministry aims to establish an equitable landscape that supports freelancers, startups, and established IT firms alike, thereby bolstering Pakistan’s IT exports and technological advancement on the global stage.
