The Pakistan Software Houses Association (P@SHA) has strongly recommended that the government exempt debit card transactions from withholding tax in the upcoming 2025-26 federal budget. This crucial proposal aims to provide much-needed relief to IT exporters, particularly those utilizing corporate debit cards linked to their Exporters’ Special Foreign Currency Accounts (ESFCAs).
In its comprehensive tax recommendations for the next fiscal year, P@SHA highlighted that the current taxation framework places an undue burden on IT companies. These businesses, already operating under a 0.25% Final Tax Regime (FTR) on export proceeds, face an additional 5% withholding tax on every corporate debit card transaction made from their ESFCAs.
“This policy results in double taxation and actively discourages the legitimate use of foreign currency accounts,” the association stated, urging the Ministry of Finance and the Federal Board of Revenue (FBR) to revise the existing framework.
P@SHA emphasized that eliminating the 5% tax on debit card usage would not only remove this redundancy but also encourage broader adoption of ESFCAs by IT firms. These accounts are indispensable for efficiently managing international transactions, especially as the sector continues to expand its global footprint.
Furthermore, the association raised concerns regarding the escalating costs and additional withholding taxes imposed on foreign currency debit cards. These cards are essential tools for global payments and purchases within the IT sector. According to P@SHA, these charges and taxes create significant barriers for IT exporters who rely on international vendors, platforms, and tools to maintain their competitive edge.
“Retention account holders already operate within a documented and regulated tax regime. Imposing further levies on their debit card transactions is both unjustified and counterproductive,” the statement read.
P@SHA has called for a complete exemption from withholding tax and other excessive fees on all ESFCA-linked debit cards. They cite the urgent need to simplify and incentivize the transparent use of foreign currency earnings.
By addressing these pressing issues, the government can significantly support Pakistan’s burgeoning IT export sector, encourage the adoption of digital payments, and enhance foreign exchange retention. P@SHA concluded its proposal with a strong appeal for pro-business reforms that ease operational bottlenecks and promote long-term industry growth.
