IT industry seeks 10-year extension of 0.25% tax regime for IT exports

The Pakistan IT Industry Association (P@SHA) has urged the Federal Board of Revenue (FBR) and the Ministry of Finance to extend the 0.25% Final Tax Regime (FTR) on IT export receipts under Section 154A until Tax Year 2036, as the existing regime is scheduled to expire in June 2026, potentially creating uncertainty for businesses planning long-term investments, foreign exchange earnings and international contracts.

The association said Pakistan’s information technology and IT-enabled services (ITeS) sector had recorded strong growth under the current tax framework, with IT exports reaching a record $3.8 billion in FY2024-25, up 18% from the previous year.

Despite the growth, P@SHA noted that Pakistan’s share in the global IT services market remains significantly smaller than regional competitors. It cited India’s technology sector, which generated $224 billion in exports and employed more than 5.4 million people during FY2024-25.

According to P@SHA, technology firms require long-term policy certainty when making decisions on delivery centres, workforce expansion and multi-year outsourcing contracts.

The association pointed to regional incentive frameworks, noting that tax and investment benefits in India’s Special Economic Zones extend for 10 to 15 years, Vietnam offers IT incentives for up to 15 years, and Bangladesh provides a 100% corporate income tax exemption for its IT sector.

P@SHA argued that extending the 0.25% FTR for 10 years would align Pakistan with competing regional markets and support investments in infrastructure such as data centres, which typically require seven to 10 years to recover costs.

The association added that long-term tax certainty would also strengthen Pakistan’s position as a destination for Global Capability Centers (GCCs), which often require stable policy frameworks before committing investments.

P@SHA said achieving the federal government's target of $15 billion in IT exports by 2030 would require annual growth rates of 25% to 30%, which it believes would be difficult without a predictable tax environment.

The association warned that allowing the FTR to expire could reduce export activity and foreign exchange inflows rather than increase tax revenues, and called on the government to announce a decision before the June 2026 deadline.