Freelancers’ remittances

The government can tap into a massive revenue stream by facilitating the domestic workforce at par with overseas workers

Freelancers’ remittances

Technology experts say much of the freelancers’ contribution towards foreign remittances is going unnoticed on account of lukewarm recognition of freelancing as an industry that can accelerate economic mobilisation.

According to World Bank data, the share of home remittances in Pakistan’s GDP was expected to reach a high in 2021. In 2020, the personal remittances were 9.9 percent of the GDP, close to the highest level of 10.2 percent in 1983. With 26 percent estimated growth taking remittances to $33 billion in 2021 — higher than merchandise exports — the remittances-to-GDP ratio would set another record.

“Although it is difficult to measure their exact share, freelancers — also known as self-employed persons — who earn from abroad while working in Pakistan make a significant part of those inflows,” says Badar Khushnood, chairman of Pakistan Software Houses Association (PASHA).

“It’s a gray area,” Khushnood says over the telephone from his Karachi office.

Freelancers (private individuals) have regular bank accounts; when they receive funds from abroad for gig work, the inflows are identified as home remittance and a 9471 purpose code according to the international transactions reporting system.

“If duly reckoned with, the annual freelancing exports might actually come to 200 percent of the official estimate of $350 million,” Khushnood says.

Pakistan Software Export Board (PSEB) spokesperson Ali Abbas says that the State Bank of Pakistan (SBP) advised banks in 2018 to separately record foreign incomes of freelancers with different heads/codes.

Realising the growth prospects of IT and IT-enabled service (ITeS) exports, the SBP in the recent past took several steps to encourage the gig economy. Banks are encouraged to facilitate foreign fund transfers for freelancers.

A couple of months ago, the PSEB launched a platform for online registration of freelancers and the government is about to unveil the country’s first National Freelancing Facilitation Policy, which envisages fiscal and non-fiscal incentives for the enterprising domestic workers who are just as important as overseas workers to bolster the external current account. “Access to bank loans, insurance and ease of foreign payments are promising benefits. The policy is expected to be implemented next year,” says Abbas.

“Freelancers need to align themselves,” he adds.

Abbas calls for registration of freelancers as a distinct entity. Many tech experts says this will only increase with improving coordination among private and public sectors and awareness of the benefits among the stakeholders.

The government estimates that there are 100,000 freelancers currently working in the country. Independent estimates of knowledge workers offering translation, design, creative and other gigs abroad stand at three million.

Freelancers’ remittances

An International Labour Organisation report counts Pakistan among main freelance labour suppliers of the world.

Owing to improved internet penetration, an individual, for example in Ghotki in Sindh is now monetising his skills on online freelancers’ marketplaces, digital labour platforms, says Haroon Qamar, a tech entrepreneur.

“How the money is transferred or through which bank account is of least concern as a matter of fact,” says Qamar, who’s also the senior vice president of Pakistan Freelancers’ Association (PAFLA). “The PAFLA has registered more than 50,000 members in the last couple of months,” he says.

Khushnood says bank officials need to be given guidance about how freelancers’ transactions should be handled.

When an SBP spokesperson was recently reached to ask if a freelancer could open a foreign currency bank account, withdraw and convert foreign currency whenever needed, the spokesperson cited a rule that freelancers couldn’t withdraw foreign currency from their bank accounts. To use their income they needed to convert the whole amount – the day it was wired – into rupees.

However, some banks do allow freelancers to withdraw foreign currency from their bank accounts through cheques. The banks are incentivised to increase inflows of home remittances.

Until recently, IT and ITeS exports were exempted from income tax.

However, now “freelancers engaged in export of IT and IT-enabled services are eligible for 100 percent tax credit under Section 65F subject to the condition that 80 percent of the export proceeds are brought into Pakistan through banking channels” if they are filing returns, wealth tax statements and sales tax returns, a PSEB spokesperson says.

The income from export of computer software or IT and ITeS is under a tax regime with one percent tax on export proceeds.

“Since the conditions for claiming 100 percent tax credit and FTR are the same with only one difference, i.e., FTR does not require bringing 80 percent export proceeds into Pakistan, if an entity is engaged in export of IT and IT-enabled services and meets all the conditions prescribed under Section 65F but does not bring 80 percent export proceeds into Pakistan then tax deductible under Section 154A would be final tax in respect of income of such person from IT and IT-enabled services,” Abbas explains.

“A person falling under FTR under Section 154A can also opt for the normal tax regime. Such an option shall be exercised every year at the time of filing of return under Section 114 of Income Tax Ordinance, 2001… the persons receiving payment against export of IT and IT-enabled services may need to obtain exemption certificate from the applicability of Section 154A and in the absence of such exemption certificates, the banks may proceed to deduct 1 percent tax from the export proceeds.”

Qamar says most people want to keep a part of their earnings abroad because of uncertainty related to rupee-dollar exchange rate and a vague regulatory framework.

Khushnood, who’s a former consultant for Google in Pakistan, says a number of freelancers remain unregistered. “We are talking to the Ministry of Commerce and IT to sort out the issues,” he adds.

A recent International Labour Organisation report counts Pakistan among main freelance labour suppliers of the world along with India, Bangladesh, the Philippines, Ukraine, the United Kingdom and the United States.

The government of Pakistan can tap into a massive external revenue stream if it facilitates the domestic workforce at par with overseas workers and provides them a level playing field.

The writer, a freelance journalist, can be reached at

Freelancers’ remittances