FBR issues clarification on tax exemption of Computer, IT services exports

March 11, 2021 (MLN): The Federal Board of Revenue (FBR) has clarified news circulating on social media about a proposal to withdraw exemption available to income from exports of computer software or IT services or IT-enabled services.

In a system issued yesterday, FBR elucidated that under the current legal dispensation, the exports of computer software, IT Services or IT enabled services is exempt from tax as provided under clause (133) of Part-I of the Second Schedule to the Income Tax Ordinance, 2001. This exemption is subject to the condition that 80% of the export earnings are remitted to Pakistan through a normal banking channel. However, the persons claiming exemptions are subject to minimum tax on their turnover.

There is a proposal to widen the scope of tax concessions available to income from the export of software, IT services, and IT-enabled services. For this purpose, the exemption is being shifted to the tax credit regime. It has been proposed that such income may be provided a hundred percent tax credit against tax liability including minimum tax liability on their turnover, said FBR.

The proposal enhances the scope of concession to the IT sector contrary to the news circulating in social media, it added.

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