Federal Board of Revenue (FBR) has confirmed that the final tax regime will continue to apply to service exports in the country. This comes as a relief for exporters, especially in light of recent changes that shifted the export of goods to the normal tax regime.
What This Means for Different Sectors:
- IT Sector Gets a Boost: A significantly reduced final tax rate of 0.25% applies to exports of computer software, IT services, and IT-enabled services by PSEB-registered entities. This aims to stimulate growth in Pakistan’s flourishing IT industry.
- Other Service Exports Still Under Final Tax: A broader final tax rate of 1% applies to various categories of service exports, including:
- Services rendered outside or exported from Pakistan
- Royalty, commission, or fees for intellectual property use
- Construction contracts executed overseas
- Commissions earned by Pakistani agents for foreign transactions
- Other service exports designated by the FBR
Benefits of Maintaining the Final Tax Regime:
- Tax Certainty and Reduced Compliance Burden: The final tax regime offers simplicity and predictability for exporters, minimizing time spent on tax complexities.
- Enhanced Export Competitiveness: Relatively low and straightforward tax rates aim to make Pakistani service exports more attractive in the global market.
- Attracting Foreign Investment: Supportive tax policies are seen as crucial to draw foreign investment, particularly in the IT sector.
The Final Word:
This decision by the FBR demonstrates their commitment to supporting Pakistan’s export sector and fostering a business-friendly environment. Streamlined tax structures, coupled with lower rates for specific sectors, are expected to play a key role in propelling Pakistan’s export growth and integration within the global economy.
