Islamabad: Pakistan’s growing services export sector has emerged as a major contributor to national revenue, enabling the Federal Board of Revenue (FBR) to achieve a 22 percent increase in tax collection during the first half of fiscal year 2025–26.
Official provisional data shows that withholding income tax collected on the export of services reached Rs3.77 billion between July and December 2025, compared to Rs3.09 billion in the same period last year. The increase reflects steady expansion in Pakistan’s IT, digital, and professional services exports.
Monthly figures also indicate positive momentum. In December 2025, the FBR collected Rs702 million in withholding tax from service exports, marking an 8 percent year-on-year rise against Rs653 million recorded in December 2024. This growth underscores consistent performance despite global economic pressures.
Withholding tax on export of services is charged under Section 154A of the Income Tax Ordinance, 2001. The tax deducted under this provision is treated as final tax, meaning exporters are not required to pay any additional income tax on these earnings.
Withholding Tax Rates on Services Exports
Under the prevailing tax regime, the applicable withholding rates are:
- 0.25 percent on export proceeds of computer software, IT services, and IT-enabled services for exporters registered with the Pakistan Software Export Board (PSEB), applicable for tax years 2024 to 2026
- 1 percent on proceeds from all other categories of service exports
Tax experts note that concessional tax rates for registered IT exporters have encouraged documentation, compliance, and formal growth within the sector. The steady rise in collections reflects both increased export volumes and improved reporting mechanisms.
With global demand for digital, freelance, and professional services continuing to expand, services exports are expected to remain a key revenue stream for the FBR, strengthening Pakistan’s external earnings and tax base in the months ahead.
