In a significant move to promote investment and growth, the federal government has unveiled a series of tax relief measures targeting the freelancing community, the IT sector, and bank loans. Finance Minister Ishaq Dar presented these proposals during the budget 2023–24 announcement, highlighting the government's commitment to fostering a favorable environment for these sectors.
To encourage investments in the IT sector, the government plans to reduce tax rates on investments made in this field. Additionally, freelancers will benefit from tax breaks aimed at supporting their entrepreneurial endeavors. Moreover, the government aims to facilitate investment in the IT sector by normalizing duty-free import of equipment, thereby lowering costs for businesses.
Recognizing the immense talent in the country's IT industry, Minister Dar proposed a lower tax rate of 20 percent for banks on investments in the sector. This reduction is significant given that the current standard tax rate on bank investments stands at 39 percent. By reducing this burden, the government seeks to encourage lending and further boost the growth of the IT sector.
In a bid to simplify procedures and enhance ease of doing business, the government recommends granting the IT industry the status of Small and Medium Enterprises (SMEs). This designation would enable individuals in the sector to enjoy special discounted income tax rates, exclusive to the IT field.
For exporters of IT and IT-related services, Minister Dar put forth several measures. He proposed issuing Automated Exemption Certificates to non-residents within 30 days, streamlining the process for them. Furthermore, there is a plan to reduce the Goods and Services Tax (GST) from 15 percent to 5 percent specifically for IT and ITeS services in Islamabad (ICT).
To facilitate freelancers, the government aims to simplify tax procedures. Minister Dar suggested removing the sales tax return requirement for individuals, allowing them to benefit from the concessional rate of 0.25 percent. He acknowledged the significant contribution of Pakistan's freelancers who work from home and bring vital foreign exchange into the country.
Additionally, individuals whose IT and IT-enabled services exports were below $24,000 in the previous fiscal year would be exempt from sales tax registration. They would also be able to file a simplified single-page income tax return, further reducing administrative burdens.
With these tax relief measures, the government aims to create a supportive ecosystem for freelancers and bolster the growth of the IT sector, attracting investment and boosting economic development.
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