3 min read
The Ministry of Information Technology and Telecom has put forward a set of proposals aimed at boosting Pakistan’s IT export potential while creating a more supportive environment for startups, small and medium-sized enterprises (SMEs), and freelancers. These measures were presented in a written submission to the National Assembly and focused on streamlining regulations, offering tax incentives, and improving financial support.
A key proposal involves categorizing the ICT sector as SMEs, which would enable businesses to access tax benefits and support measures. The ministry also provides policy support for setting up facilitation desks in overall financial institutions to reduce business setup and tax-related procedure time and enhance operations.
Among other reforms, the Ministry suggested tax exemptions on the import of IT hardware and software critical for IT exports. They also suggested coming up with the “Made in Pakistan” initiative for the technology products with the aim of stimulating the domestic industry.
One of the core recommendations involves enhancing the role of the State Bank of Pakistan (SBP) in supporting ICT startups and SMEs. The ministry suggests that the SBP should open facilitation desks in all branches dealing with Export Special Foreign Currency Accounts (ESFCA) to ease overseas operations.
Also, the ministry calls for expediting the issuance of new ESFCA debit cards for corporations with 100% balances retained in them while creating an online foreign exchange hub for remittance flows in and out of the country.
In terms of tax reforms, the Ministry of IT has proposed that the Federal Board of Revenue (FBR) eliminate the 5% advance tax on debit cards linked to ESFCA accounts. They also want a unified definition of IT and IT-enabled services (ITeS) across federal and provincial levels.
Another recommendation is to extend the existing 100% tax credit for startups registered with the Pakistan Software Export Board (PSEB) until 2030. The ministry also called for tax exemptions on dividends and capital gains from IT startups and removing sales tax on IT services.
Freelancers, who play a key role in boosting foreign remittances and reducing unemployment, were also a focus. The ministry has introduced a plan to remove freelancers from monthly sales tax returns and registration to slash bureaucratic formalities.
In order to enhance the freelance segment, the ministry suggested continuing tax incentives, which can include the change of the tax rate from 1% to 0.25% for freelancers who are registered in PSEB. This would ease the burden on freelancers and foster a more favorable business environment.
The Ministry of IT also advised the setting up of a Government-funded venture capital fund for financial support to startups, SMEs, and freelancers. Also, they propose offering tax breaks to banks and venture capital firms lending to the IT sector, ensuring financial backing for early-stage companies.
Lastly, to prevent talent migration from domestic companies to freelance roles, the Ministry emphasizes a balanced approach to taxation and support structures. Some IT firms have been around in Pakistan for years, but many are still starting up. The Ministry of IT wants to simplify tax procedures and develop online tax forms to improve the environment for IT firms, boost IT exports, and advance technology.
