Tax Analysis: Mapping Cost of Doing Business for IT & ITeS in Pakistan

In the past two years, there have been abrupt changes made in the tax regime for the IT & ITeS sector. The IT & ITeS were given a fiscal incentive of 100% tax exemption on income tax for the next 10 years. While the incentive was provided, companies experienced procedural challenges in acquiring exemption certificates. For instance, companies were not given tax exemption certificates even after applying and waited for over six months to acquire certificates.

It’s critical to be noted that such frequent regulatory changes imply uncertainty in the already evolving ecosystem of Pakistan. The anxiety in the system discourage the foreign clients to bring revenue in Pakistan. Importantly, the changes have a larger trickle-down effect on the growth of IT industry. Compared to FY 2020-2021, the growth of annual IT exports has dropped down from 47% to 23% in the year 2021-2022.