P@SHA Calls for 10-Year Tax Extension to Sustain IT Sector's Historic Export Growth

IT Exports Soar to Record Highs: P@SHA Seeks Policy Reforms to Drive Further Growth

Pakistan's IT sector is witnessing unprecedented growth, with exports reaching record-breaking levels. In light of this, the Pakistan Software Houses Association (P@SHA) has urged the federal government to extend the concessional final tax regime (FTR) on IT and IT-enabled services (ITeS) exports for an additional ten years, until 2035. Currently set to expire in June 2026, the FTR imposes a reduced 0.25% withholding tax on export earnings of PSEB-registered entities. P@SHA argues that extending the FTR is essential to maintaining export momentum, attracting foreign investment, and ensuring long-term stability in Pakistan's digital economy.

Highlighting the IT sector's potential, P@SHA Chairman Sajjad Mustafa Syed stated that the proposed extension aligns with the national vision of exponential growth in technology exports. The IT industry has seen substantial investments, operational expansions, and diversification in export markets, supported by favorable policies and exchange rates. In March 2025, IT exports hit an all-time high of $342 million, marking 18 consecutive months of growth. Total exports for the first nine months of FY2025 reached $2.8 billion, and analysts predict the full-year figure will range between $3.5 and $3.7 billion, setting the stage for achieving the ambitious $10 billion export target by FY2029.

Talent Drain and Tax Policy Hurdles Threaten Pakistan's IT Industry Momentum

To sustain growth, P@SHA has also emphasized the need to address other pressing issues, such as income tax disparities causing talent migration. Syed highlighted that significantly higher income tax rates in Pakistan compared to competitor nations are leading to a brain drain, making it difficult for local companies to retain skilled professionals. P@SHA has called for a reduction in income tax rates for IT employees to unlock the sector's full potential and curb this trend.

Additionally, P@SHA has recommended the removal of withholding tax (WHT) on US dollar payments to non-resident service providers engaged in re-export services. Such payments, made from Exporters' Special Foreign Currency Accounts, currently attract a 15% WHT under Pakistan's Income Tax Ordinance. Syed argued that exempting these payments would streamline cross-border transactions, encourage the inflow of funds, and simplify operations for IT exporters. With growing optimism in the sector, industry stakeholders believe that long-term tax and policy reforms are crucial to sustaining the current trajectory of success.

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