P@SHA calls for 10-year tax stability, seeks clear split between freelancers and remote IT workers

The Pakistan IT Industry Association (P@SHA) has called for long-term policy certainty in the federal budget, recommending the continuation of the existing 0.25 per cent final tax regime for IT exporters and genuine freelancers for a period of 10 years.

In its Federal Budget 2026-27 proposals, the industry body said predictable taxation and regulatory stability were critical for sustaining export growth, attracting foreign clients and strengthening Pakistan’s formal IT sector.

P@SHA said the proposed continuity of the simplified tax regime would support registered technology companies, improve foreign exchange inflows and reinforce the country’s position in global digital services markets.

A central element of the recommendations is a proposed policy distinction between two segments of the digital workforce: project-based freelancers and full-time remote employees working for foreign employers.

Under this framework, P@SHA said genuine freelancers should continue to benefit from the 0.25pc final tax regime, while individuals receiving fixed salaries from overseas companies should be brought under standard income tax slabs applicable to salaried workers.

The association said this separation was necessary to reduce distortions in the labour market and to ensure fair competition between formal IT enterprises and unregulated remote work arrangements.

P@SHA maintained that its stance supports both the expansion of registered IT companies and the gradual formalisation of Pakistan’s broader gig economy, while preserving incentives for legitimate freelance activity.

The proposals also reflect concerns raised by industry stakeholders over uneven competition for skilled talent, as local IT firms investing in infrastructure, compliance systems, employee benefits and training face increasing competition from remote opportunities offered by foreign employers.

Tufail Ahmed Khan, Honorary President of the Global Freelancers Union (GFU), said the proposal appropriately maintains preferential tax treatment for authentic freelancers while suggesting that salaried remote workers employed by overseas entities should be taxed under normal income tax rules.

He noted that registered IT companies bear higher structural costs due to regulatory compliance and workforce development obligations, while unregistered or informal arrangements often operate with lower overheads.

Industry participants argue that clearer classification and consistent tax treatment would reduce uncertainty, improve compliance, and support long-term growth in Pakistan’s digital export sector.