In a significant move aimed at boosting the freelancing sector, the federal government of Pakistan has announced a major relief measure in the budget for the fiscal year 2023-24. Freelancers will now be exempted from sales tax registration and returns on their annual exports up to $24,000.
During his budget speech in the National Assembly, Finance Minister Ishaq Dar highlighted the rapid growth of the IT and IT Enabled Services sectors in Pakistan, emphasizing their significant contribution to the country’s exports. However, he acknowledged that these sectors have also faced challenges due to the global economic downturn.
Minister Dar expressed his confidence in the future growth potential of the freelancing industry, which currently ranks second in the world. To address the issues faced by freelancers and the sector as a whole, several steps have been introduced. One of the key measures is a 0.25% income tax break to incentivize exports, which will remain in effect until June 30, 2026.
Previously, freelancers encountered difficulties in managing monthly sales tax returns. To create a more favorable business environment, the government has now exempted freelancers from sales tax registration and returns on exports up to $24,000 per year. This move is expected to ease the burden on freelancers and encourage their participation in global markets.
Furthermore, IT and IT Enabled Service Providers will now be able to import software and hardware tax-free, with the limit set at 1% of their export value. The annual cap for these imports has been established at $50,000. Additionally, Automated Exemption Certificates will be issued to IT and IT Services Exporters to streamline the process.
Recognizing the importance of the IT sector, Finance Minister Ishaq Dar announced that it has been granted Small and Medium Enterprise (SME) status. This designation will enable IT companies to benefit from lower income tax rates, providing them with a competitive edge. To foster the growth of IT startups, a Venture Capital Fund of 5 billion rupees has been allocated to provide business capital and support mentoring initiatives.
In a bid to promote lending in the IT sector, banks will enjoy a 20% concessional tax rate. This measure is expected to encourage financial institutions to extend credit facilities to IT companies, further stimulating growth and innovation in the industry. Additionally, the sales tax rate on ICT-related IT services will be reduced from 15% to 5%, making them more affordable and attractive to consumers.
Recognizing the need for skilled professionals in the IT sector, the government plans to provide professional training to 50,000 IT graduates in the upcoming fiscal year. This initiative aims to bridge the skills gap and equip individuals with the necessary expertise to thrive in the digital economy.
Read more: Govt Sets Aside Only Rs. 97 Billion for Education in Budget 2023-24
The government’s decision to exempt freelancers from sales tax registration and returns on exports up to $24,000 demonstrates its commitment to supporting the freelancing community and promoting the growth of the IT sector. These measures are expected to enhance the competitiveness of Pakistani freelancers in the global market and encourage more individuals to pursue freelance opportunities. With a conducive business environment and favorable tax policies, Pakistan’s freelancing industry is poised for continued success in the years to come.
