FBR Explains Service Export Income Tax


ISLAMABAD: The Federal Board of Revenue (FBR) has explained the treatment of income tax on the export of services as amended by the 2022 budget law.

The FBR has issued Income Tax Circular No. 15 of 2022/2023 to explain the significant changes made by the Finance Act 2022 to the Income Tax Ordinance 2001.

The Revenue Authority has stated that a special scheme u/s 154A of the Income Tax Ordinance 2001 for the export of computer and IT services has been introduced by the Finance Act 2021, under of which 1% of the final tax was levied on the realization of the product of the export of these services. .

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In addition, a hundred percent tax credit was available on this final tax for exporters of computers and computer-enabled services u/s 65F after fulfilling a few conditions mentioned therein.

In order to simplify the tax regime for exporters of IT and IT services, the 100% tax credit regime provided for in Article 65F of the Ordinance has been abolished and a reduced final tax rate of 0.25 % was provided for computer exporters. and computer services which are registered with the Pakistan Software Export Board (PSEB).

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Corresponding changes to Section 65F have been made accordingly. In addition, the scope of the definitions of computer services and computer services contained in clause (30AD) and clause (30AE) of article 2 of the ordinance have been clarified and widened by the finance law of 2022.

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The FBR has previously stated that the amount of foreign commission due to an indentation commissioner is charged to tax, at the rate of 5%, under subsection (2) of article 154 of the Arrangement. Now, this rate has been reduced to 1% by incorporating clause (da) into subsection (1) of section 154A of the Ordinance. Corresponding amendments have been made to Article 154 accordingly.

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Further, the provisions of the Tenth Schedule will not apply to tax to be levied under Section 154A of the Ordinance. The necessary change has been incorporated into Rule 10 of the Tenth Schedule in this regard, the FBR added.

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