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Tuesday September 27, 2022

IT sector removed from tax credit regime, cess reduced to 0.25pc: FBR

The FBR said amendments in Finance Bill were made to incorporate tangible measures for exporters of IT and IT enabled services such as reducing tax rate to 0.25pc on IT export proceeds

By Our Correspondent
June 26, 2022
Photo: The News/File
Photo: The News/File

ISLAMABAD: Federal Board of Revenue (FBR) on Saturday said amendments in Finance Bill were made to incorporate tangible measures for exporters of IT and IT enabled services such as reducing tax rate to 0.25pc on IT export proceeds, removing the sector from tax credit regime to simply tax filing, and liberalizing requirements of filing withholding tax statements.

Reacting to Pakistan Software Houses Association’s (PASHA) statement, “IT sector was abandoned in Budget 2022-23”, FBR said the statement was based on “lack of information about the decisions”.

The board said meetings were held with representatives of IT sector through Software Export Board (PSEB) also with Federal Minister for IT, Syed Amin-Ul-Haque, and his team in the wake of Budget’23.

“Almost all the key demands of the IT Sector were thoroughly deliberated and largely agreed,” FBR said.

The board stated that IT sector was provided a reduced tax rate of 0.25 percent on their export proceeds, which is a quarter of

the 1 percent export tax rate provided to all other exporters of goods.

“The sector has been removed from tax credit regime to simplify the tax filing system and to remove hassles of compliance that were earlier required to make them eligible for 100% tax credit to claim tax exemption.”

The requirements of filing of withholding tax (WHT) statements and sales tax return have been liberalised for the sector and only those who are required under the law will file WHT statements or sales tax returns.

For individuals having turnover up to Rs100 million per year there is no requirement to file WHT statement or to deduct tax, the board added.

“IT and IT enabled services exporters have been provided the facility of obtaining sales tax refund in respect of any sales tax that has been paid as their input on computers, laptops, stationary other items, etc. This facility is not available under the provincial sales tax law.”

FBR said it had accepted the demand of the IT sector of reviving tax exemption for venture capital fund and the board created a new provision for providing income tax exemption to venture capital fund for three years.

The board explained that the definition of IT and IT enabled services as provided under the Income Tax Ordinance, 2001 were liberalised by expanding its scope by making suitable amendments and all inclusive, and “not limited to” definition was provided.

FBR said above exemptions and tax facilitations would boost exports of IT and IT enabled services were agreed and discussed in meetings with IT minister and PSEB.

Finance Minister Miftah Ismail had also announced these measures in a recent speech in National Assembly, FBR reiterated.

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