KARACHI: In a bid to strengthen export growth and attract foreign investment, thePakistan Software Houses Association (PSHA) has urged the government to continue the final tax regime (FTR) for IT and IT-enabled services (ITeS) for 10 years, The News reported on Thursday.
The current FTR is scheduled to expire on June 30, 2026. Moreover, it allows a reduced withholding tax of 0.25% on export proceeds for PSEB-registered companies,
As part of the association’s detailed budgetary proposals for the upcoming Federal Budget 2025-26,PSHA Chairperson Sajjad Mustafa Syed made the appeal.
The proposals emphasise structural reforms focused on enhancing foreign direct investment (FDI), export competitiveness, employment generation and overall development of Pakistan’s IT sector.
Syed stressed that extending the FTR until 2035 would ensure stability, predictability and investor confidence, at a time when the industry is witnessing rapid growth, regional expansion, and increasing global demand for Pakistani tech talent.
“The continuation of FTR will simplify tax compliance for IT firms and enable exporters to reinvest in business growth, innovation, and digital transformation,” he said. “Policy-level consistency and tax incentives are essential for positioning Pakistan as a regional IT powerhouse.”
He also pointed out that regional competitors offer long-term tax incentives to attract IT-related FDI, and that Pakistan must adopt similar measures to stay competitive.
A 10-year tax exemption, according to PSHA, aligns with the objectives of the Special Investment Facilitation Council (SIFC) and the prime minister’s vision for exponential growth in IT exports.
Raising concerns over income tax disparities within the sector, Syed noted that salaried employees in IT companies currently face income tax rates ranging from 5%-35%, compared to the 0.25% to 1.0% paid by remote workers.
This imbalance, he warned, is contributing to brain drain and making it difficult for local firms to retain skilled professionals. He called for significantly lower income tax rates for salaried IT professionals to unlock the sector’s full potential.
Another key proposal from PSHA involves encouraging foreign exchange repatriation. Syed criticised the current Income Tax Ordinance, 2001, which imposes a 15% withholding tax on payments made to non-residents for services rendered, particularly in the absence of double taxation agreements.
To counter this, PSHA has proposed an exemption from withholding tax on payments made from Exporters’ Special Foreign Currency Accounts (ESFCA). This, Syed said, would apply to all categories of IT services and would facilitate the inward flow of foreign earnings into Pakistan.
PSHA’s budgetary proposals reflect the association’s broader push to create a sustainable and globally competitive digital economy, rooted in policy continuity, tax reforms and investment-friendly regulations.