Karachi – In a move aimed at boosting Pakistan’s digital economy and securing long-term growth for its tech industry, the Pakistan Software Houses Association (P@SHA) has urged the government to extend the Final Tax Regime (FTR) for the IT and IT-enabled services (ITeS) sector until 2035.
This request comes as the Federal Budget 2025–26 is being finalized, with P@SHA submitting key proposals designed to attract foreign investment, simplify taxation, and establish Pakistan as a global tech hub.
What Is the Final Tax Regime (FTR)?
Currently, companies registered with the Pakistan Software Export Board (PSEB) benefit from a reduced 0.25% withholding tax on export proceeds under the FTR. However, this policy is scheduled to expire in June 2026, creating uncertainty for both local and foreign investors.
P@SHA’s Call for Tax Policy Continuity
Sajjad Mustafa Syed, Chairperson of P@SHA, emphasized the importance of extending the FTR for another 10 years, stating:
“The continuation of the FTR will not only encourage reinvestment in talent and innovation, but also provide the predictability that global investors look for.”
He highlighted that regional competitors offer long-term tax incentives to tech exporters, giving them an edge in attracting foreign direct investment (FDI).
Addressing Tax Imbalances in the IT Workforce
Syed also voiced concerns over tax disparities among IT professionals in Pakistan. While freelancers and remote workers are taxed at 0.25% to 1%, salaried employees in registered IT companies face rates between 5% and 35%.
This imbalance, he warned, contributes to the brain drain—a growing challenge for Pakistan’s tech industry—as skilled professionals seek better opportunities abroad.
💸 Proposed Reforms to Encourage Forex Inflows
To further ease foreign transactions, P@SHA recommended removing the 15% withholding tax on payments made from Exporters’ Special Foreign Currency Accounts (ESFCAs) to non-resident service providers. Currently, this tax—especially in countries lacking double taxation treaties—acts as a barrier to bringing in foreign exchange.
🇵🇰 Supporting Pakistan’s Digital Vision
P@SHA’s tax reform proposals are in alignment with the Special Investment Facilitation Council (SIFC) and the Prime Minister’s vision to accelerate the country’s digital exports.
By creating a tax-friendly, investor-ready environment, Pakistan can unlock the full potential of its IT sector—one of the fastest-growing segments of the economy.
Why This Matters
Job Creation: A thriving IT sector supports high-paying jobs and talent development.
Global Competitiveness: Predictable tax policies help position Pakistan as a global outsourcing destination.
Economic Growth: Increased exports = stronger foreign reserves and macroeconomic stability.
Final Thoughts
As Pakistan aims to become a digital powerhouse, policy consistency and tax reforms are critical. Extending the Final Tax Regime till 2035 could be the turning point that drives sustained growth, retains local talent, and attracts global tech investors.
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