Tax Credits for IT Exporters – How to Claim Them in Pakistan

Pakistan’s IT industry is one of the fastest-growing sectors, supported by generous tax incentives from the Federal Board of Revenue (FBR) and the Pakistan Software Export Board (PSEB). To promote exports of software and IT-enabled services (ITES), the government allows registered companies and freelancers to claim tax credits and exemptions on export income.

If you operate a tech company, software house, or freelance export business, understanding how to properly claim your IT tax credits is essential to maximize your tax savings and stay compliant.

What Are IT Export Tax Credits?

Tax credits for IT exporters are reductions in payable income tax granted by the government to promote technology exports. These credits apply to income derived from software development, IT-enabled services, BPO operations, call centers, and other digital exports.

They are available to both:

• Private Limited Companies (Pvt Ltd) registered with SECP and PSEB.

• Freelancers or Sole Proprietors registered with FBR as exporters.

Legal Basis for IT Export Tax Benefits

These incentives are governed by:

• Income Tax Ordinance, 2001 (Section 65F & Clause 133, Part I of Second Schedule)

• SRO 1172(I)/2021 – Defines eligibility for 100% tax credit on IT export income.

• FBR Circular No. 1 of 2023 – Clarifies that PSEB registration and remittance through banking channels are mandatory for tax credit claims.

Who Qualifies for IT Export Tax Credits?

To qualify for tax credits or exemptions, the following conditions must be met:

1. Business Nature: The company or freelancer must earn income from IT or IT-enabled services such as:

   • Software development

   • Web or app development

   • Cloud services, BPO, call centers

   • Data analytics or digital design

2. Registration with PSEB: Must be registered with the Pakistan Software Export Board.

3. FBR Active Taxpayer: Must hold a valid NTN and appear on the Active Taxpayer List (ATL).

4. Export Proceeds in USD: Export income must be remitted to Pakistan through formal banking channels in foreign currency.

5. Filing Returns: Annual income tax return, withholding statements, and sales tax (if applicable) must be filed regularly.

6. Audited Accounts: For companies, audited financial statements verifying export income are required.

Types of Tax Incentives for IT Exporters

How to Claim IT Export Tax Credit – Step-by-Step

1. Register with PSEB

• Visit https://registration.pseb.org.pk/

• Create an account and submit company or freelancer details

• Upload CNIC, NTN, business profile, and service list

• Once approved, download the PSEB Registration Certificate

2. Ensure FBR Registration and ATL Status

• Apply for an NTN at https://iris.fbr.gov.pk/

• File tax returns regularly to remain on the Active Taxpayer List

• Verify status at https://www.fbr.gov.pk/active-taxpayers

3. Maintain Proof of Export Proceeds

• All export income must come via official banking channels (SWIFT transfers)

• Retain bank credit advice (BCA) and foreign inward remittance certificates (FIRC) from your bank

• Keep contract copies, invoices, and client payment records

4. File Annual Tax Return with Export Income Declared

• In the FBR IRIS portal, file your Income Tax Return and declare export income under “Foreign Income – IT Exports”

• Attach supporting documents:

  • PSEB registration

  • Export proceeds certificate

  • Bank statements showing foreign remittances

5. Claim 100% Tax Credit

• When filing, tick the option for “Claim under Section 65F”

• Enter the export income amount and attach proof

• The system will automatically apply the tax credit and reduce your tax liability to zero (if eligible)

6. Maintain Audit Trail

• Retain all supporting documents for six years in case of FBR audit.

• Keep audited accounts and correspondence with clients ready for verification.

Example

Suppose your IT company earns USD 100,000 from foreign clients and files all returns on time:

• Normal corporate tax = 29% of taxable income

• By claiming Section 65F credit → Tax Payable = 0

• However, if the company misses filing or PSEB registration → full tax applies.

Common Mistakes That Cause Rejection

• Not registered with PSEB or expired certificate

• Export proceeds received in personal accounts instead of business accounts

• Late filing of tax returns or withholding statements

• Income not properly declared as “IT exports” in the FBR return

• Missing documentation of foreign remittances

Validity Period of IT Export Incentives

The 100% tax credit under Section 65F is available until June 30, 2025, subject to renewal. The government has extended this benefit several times to encourage continued export growth, and further extensions are expected as part of the Digital Pakistan initiative.

Benefits of Claiming IT Tax Credit

• Zero income tax on export earnings

• Exemption from sales tax on exported services

• Improved cash flow for reinvestment in tech operations

• Recognition by PSEB, making you eligible for export awards and government programs

• Easier access to foreign contracts and tenders as a compliant exporter

Key Deadlines for 2025

Final Thoughts

Claiming tax credits for IT exports in Pakistan is one of the most valuable advantages for tech companies and freelancers. By registering with PSEB, maintaining clean export records, and filing your tax returns on time, you can enjoy zero tax on export income while remaining fully compliant with FBR laws.

These benefits make Pakistan’s IT export regime one of the most favorable in the region for digital entrepreneurs and software exporters.