How to get tax exemption for freelancers in Pakistan?

Did you know that freelance services are booming globally? Pakistan ranks among the top countries offering freelance services, particularly in software development and IT-related sectors. Freelancers from Pakistan cater to clients worldwide. To bolster the freelance sector in IT, the Government of Pakistan extends full income tax exemption to freelancers, a privilege previously reserved for software houses and call centers.

To safeguard the IT industry’s interests, the Pakistan Software Export Board (PSEB) was established by the government to oversee and promote the Information and Communication Technology (ICT) sector. PSEB not only licenses IT businesses but also oversees IT sector development, legal reforms, and other ICT-related matters. Furthermore, PSEB now registers and licenses freelancers providing IT services from or within Pakistan.

What Does Tax Relief Entail for Freelancers?

Under the recent Finance Act introduced in 2022, Section 65F of the Income Tax Ordinance, 2001, offers a 100% tax credit to individuals providing the following IT export services:

  • IT services related to software export
  • IT services
  • IT-enabled services

Requirements for Tax Relief:

To qualify for the 100% tax credit, freelancers offering IT export services must register with PSEB and meet the requirements outlined in subsection 2 of Section 65F of the Income Tax Ordinance, 2001, as detailed below:

  • File annual income tax returns
  • Submit monthly withholding statements if acting as a withholding agent
  • Submit monthly Sales Tax returns if providing services within Pakistan

How to Apply for PSEB Freelancer Registration in Pakistan:

  1. Visit the official PSEB link: PSEB Registration Portal.
  2. Navigate to the REGISTRATION tab at the top of the page and click on NEW REGISTRATION.

For New Freelancers:

  • Complete the signup form and generate your credentials.
  • Provide accurate details and attach all necessary documents as required on the Registration page. Inaccurate information may lead to rejection by PSEB.
  • After initial approval, pay the registration fee and provide proof before submission.
  • Upon verification of payment by PSEB, the registration certificate is issued within 4-6 days.

Documents Required for PSEB Registration for Freelancers:

  • Scanned copy of NTN certificate
  • Scanned color copy of CNIC
  • Bank Account Maintenance Certificate issued by a Scheduled Bank of Pakistan. (Bank account must be in the freelancer’s name only)

Renewal of PSEB License for Freelancers:

PSEB licenses for freelancers are valid for one year only and must be renewed annually. Here’s how to renew your license:

  • Log in to the PSEB registration portal using your credentials.
  • Upload necessary documents and provide relevant data in the fields before submitting the form.
  • Upon application approval, deposit the renewal fee with PSEB and upload proof before submission.
  • Upon verification of payments and information provided, renewal is granted within 4-6 days.

Documents Required for PSEB Renewal of Registration for Freelancers:

  • Income Tax Return for the current year
  • Form R issued by the bank

(Note: These documents are in addition to those required for registration.)

At Mithan Enterprises, we specialize in registering and filing PSEB for our clients, ensuring they benefit from various tax incentives in Pakistan. Additionally, we offer services for clients involved in disputes related to PSEB. With our expertise in legal and procedural matters concerning tax disputes, we tailor solutions to help our clients achieve their objectives efficiently.

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