ISLAMABAD: The federal government has announced a significant relief measure for Pakistan’s information technology sector under the Finance Bill 2026. The reduced withholding tax rate of 0.25 percent applicable on export proceeds of IT and IT-enabled services (ITeS), previously set to expire in 2026, has been formally extended through Tax Year 2029.
This continuation of the concessionary regime is expected to provide sustained fiscal certainty to technology exporters and incentivize further growth in the country’s digital export earnings.
Under the Income Tax Ordinance, 2001, exporters of IT and IT-enabled services have been availing a concessionary withholding tax rate of 0.25 percent on their foreign exchange remittances, as opposed to the standard applicable rates. This preferential treatment was introduced to bolster Pakistan’s IT export sector, encourage the registration of technology companies with the Federal Board of Revenue (FBR) and bring informal digital service providers into the formal tax net, all while ensuring that the effective tax burden remains minimal so as not to impede competitiveness in global markets.
The extension of this benefit through Tax Year 2029 is particularly noteworthy for technology firms, and freelance exporters can now plan multi-year operations with fiscal certainty, avoiding the uncertainty that accompanies year-to-year policy reviews.
Pakistan has demonstrated significant year-on-year growth in IT export revenues. The continuation of this tax incentive is expected to further accelerate remittance inflows from the technology sector. The concessionary rate serves as an incentive for freelancers and small technology enterprises to register with the FBR and route earnings through formal banking channels. Maintaining a near-zero effective tax burden on IT exports will keep Pakistan competitive vis-à-vis regional technology hubs, said Chairman LTBA Public Interest Litigation Committee Waheed Shahzad Butt.
Copyright Business Recorder, 2026
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