Tax ordinance makes return filing mandatory for IT exporters

ISLAMABAD: The Tax Laws (Second Amendment) Ordinance, 2021, has made the filing of income tax return mandatory for people engaged in exporting computer software to avail 100pc tax credit.

According to details, exemptions for IT and IT-enabled services have been withdrawn through the ordinance; however, a tax credit equal to 100pc has been granted to facilitate the software exports. Certain conditions, including making return filing mandatory and provision of income tax audit, have been added through the latest amended ordinance.

The new section added to the Income Tax Ordinance, 2001 through Tax Laws (Second Amendment) Ordinance, 2021, reads, “Income of following taxpayers shall be allowed a tax credit equal to 100 per cent of the tax payable under any provisions of this Ordinance: (a) persons engaged in coal mining projects in Sindh supplying coal exclusively to power generation projects; (b) a startup as defined in clause (62A) of section 2 for the tax year in which the startup is certified by the Pakistan Software Export Board and the next following two tax years; (c) persons deriving income from exports of computer software or IT services or IT enabled services up to the period ending on the 30th day of June 2025, provided that 80 per cent of the export proceeds are brought into Pakistan in foreign exchange remitted from outside Pakistan through normal banking channels.”

As per the ordinance, IT services include software development, software maintenance, system integration, web design, web development, web hosting and network design, while IT-enabled services include inbound or outbound call centres, medical transcription, remote monitoring, graphics design, accounting services, HR services, telemedicine centers, data entry operations, locally produced television programs and insurance claims processing.

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“Tax credit under sub-section (1) shall be available subject to fulfillment of the following conditions, namely:- (a) return has been filed; (b) tax required to be deducted or collected has been deducted or collected and paid; (c) withholding tax statements for the immediately preceding tax year have been filed; and (d) sales tax returns for the tax periods corresponding to relevant tax year have been filed: Provided that nothing contained in this section shall preclude the applicability of section 214C or section 177,” the ordinance read.

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