Pakistan IT export tax rate: 0.25% and 1% compared
Pakistan taxes IT and IT-enabled services exports at rates that are, by any international standard, extremely low. The rates are also conditional, and the conditions are about banking and registration rather than about the work itself. This guide covers what the rate is, what has to be true for it to apply, and what happens when it does not.
The rates
| Treatment | Rate | Condition |
|---|---|---|
| PSEB-registered exporter | 0.25% | PSEB registration plus export, banking-channel and filing conditions. Extended to 30 June 2029 by the Finance Act 2026. |
| Exporter without PSEB registration | 1% | Qualifying IT/ITeS export receipts through approved banking channels |
| Everything else | Business slab rates | Local clients, non-qualifying services, or receipts failing the conditions |
The concession was scheduled to lapse on 30 June 2026. Its extension to 2029 was one of the more significant measures in the Finance Act 2026 for the sector — see the Finance Act 2026 register.
What the difference is worth
Business income for individuals and associations of persons runs on a separate, much steeper schedule than salary: Rs 170,000 plus 30% above Rs 1,600,000, rising to Rs 1,610,000 plus 45% above Rs 5,600,000.
| Annual export income | At 0.25% | At 1% | At business slab rates |
|---|---|---|---|
| Rs 2,400,000 | Rs 6,000 | Rs 24,000 | Rs 410,000 |
| Rs 6,000,000 | Rs 15,000 | Rs 60,000 | Rs 1,790,000 |
| Rs 12,000,000 | Rs 30,000 | Rs 120,000 | Rs 4,490,000 |
You earn from Upwork, Fiverr, direct foreign clients or a remote employer abroad, and the money lands in a Pakistani bank account.
The conditions that actually decide it
- The service must be IT or IT-enabled services within the statutory definition. Not everything delivered to a foreign client qualifies; the classification follows the definition, not the industry you consider yourself part of.
- The recipient must be outside Pakistan, evidenced by contract and client records.
- Receipts must arrive in Pakistan through approved banking channels, with a commonly applied condition that at least 80% of export income be so received during the tax year.
- PSEB registration, if the 0.25% rate is claimed.
- FBR registration and return filing must be current. The concessionary regimes do not replace either.
What counts as IT and IT-enabled services
The concession attaches to a statutory category, not to a self-description. Software development, software maintenance and support, systems integration, web and application development, data processing, and a range of remote back-office services delivered through information technology are the recognisable core. The definition applied for sales tax purposes has been aligned with the Income Tax Ordinance 2001, which helps, but it does not resolve every case.
The boundary cases are where advice earns its fee: design and creative work delivered digitally, marketing and content services, general consultancy delivered over video, and hybrid engagements that mix software with advisory. These are not automatically inside the category simply because they are delivered remotely to a foreign client and paid for by wire transfer.
The banking condition in operational terms
This is where most claims fail, and it fails for mechanical reasons rather than through any intent to avoid tax.
- A platform balance is not a receipt. Funds held on a marketplace or in a processor wallet have not entered Pakistan.
- Withdraw through a proper route into a Pakistani account. Payoneer or Wise transfers landing in a local bank account through the correct channel generally work; third-party accounts and informal settlement do not.
- Collect the realisation evidence as routine. The proceeds realisation certificate is what connects an invoice to an inward remittance — request it monthly, not when a notice arrives.
- Watch the year end. Timing decides which tax year a receipt lands in and whether the annual proportion is met.
Remittance evidence covers the documentation in detail.
Company or individual?
The concessionary regime is available without incorporating. A company may still make sense for client requirements, liability, hiring or investment, but it brings SECP incorporation and annual compliance costs that a sole practitioner does not carry. Decide on commercial grounds and treat the tax rate as neutral between the two — see choosing a structure.
Do not forget the provincial layer
Income tax is only half the picture. IT services rendered within Pakistan fall under provincial services tax — in Punjab at a reduced 5% rate, with input tax blocked. A software house with both export and domestic revenue has a federal income tax question and a provincial sales tax question, and they are answered separately. Punjab services tax covers that side.
Sources
This guide is written against the official and clearly labelled professional references below. Rates, thresholds and portal procedures change between reviews, so open the primary source before relying on a figure.
- Finance Act 2026 (FBR)
- Federal Budget 2026-27 salient features (FBR)
- Pakistan Software Export Board / Tech Destination
- PSEB membership benefits
Questions people also ask
Is the 0.25% rate guaranteed until 2029?
The Finance Act 2026 extended it to 30 June 2029, which is meaningfully more certainty than the sector had when it was due to lapse in June 2026. It remains a policy concession created by statute, and a future Finance Act can revise it. Plan on it, but re-check it each July.
Does the 0.25% rate apply to my whole income or only to export receipts?
Only to qualifying export receipts. Local client revenue, non-IT services and any receipts failing the conditions are computed separately under the ordinary rules. A business with both streams needs them separated in its books from the outset, not reconstructed at filing.
Is the 1% rate final or adjustable?
Treatment varies with the section under which the deduction is made and the taxpayer facts, and commentary is not uniform on this point. Establish the character for your own situation before deciding whether the deduction settles your liability or is merely a credit against it, because that determines whether you have a further payment to make.
Does the concession cover sales tax on services too?
No. Income tax and provincial services tax are separate regimes. Qualifying for the 0.25% income tax rate says nothing about your services tax position, and IT services rendered locally in Punjab attract a reduced 5% PRA rate with input tax blocked. Handle both.
What happens to income left in a foreign platform wallet at year end?
It has not been received in Pakistan through an approved banking channel, so it does not count toward the proportion of export income that must be so received. Balances accumulating across the year end are a common reason an otherwise valid concession claim fails.
Send the tax year and the transaction or filing involved, and we will tell you what is actually required.
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