TLTP
ISLAMABAD
The Tax Laws (Second Amendment) Ordinance, 2021 has made the filing of income tax return mandatory for persons engaged in exporting computer software to avail 100 percent tax credit.
According to details, the exemptions for IT and IT enabled services have been withdrawn through the ordinance; however, a tax credit equal to 100 percent has been granted to facilitate the software exports. Certain conditions have been introduced including making return filing mandatory and provision of income tax audit has been added through the latest amended ordinance.
The new section added to the Income Tax Ordinance, 2001 through Tax Laws (Second Amendment) Ordinance, 2021 says: “65F Tax credit for certain persons.- (1) Income of following taxpayers shall be allowed a tax credit equal to one hundred per cent of the tax payable under any provisions of this Ordinance including minimum and final taxes for the period, to the extent, upon fulfillment of conditions and subject to limitations detailed as under: (a) persons engaged in coal mining projects in Sindh supplying coal exclusively to power generation projects; (b) a startup as defined in clause (62A) of section 2 for the tax year in which the startup is certified by the Pakistan Software Export Board and the next following two tax years; (c) persons deriving income from exports of computer software or IT services or IT enabled services up to the period ending on the 30th day of June, 2025:
“Provided that eighty per cent of the export proceeds is brought into Pakistan in foreign exchange remitted from outside Pakistan through normal banking channels.”
It has been explained: “(i) “IT services” include software development, software maintenance, system integration, web design, web development, web hosting and network design; and (ii) “IT enabled services” include inbound or outbound call centres, medical transcription, remote monitoring, graphics design, accounting services, HR services, telemedicine centers, data entry operations, locally produced television programs and insurance claims processing.”
It has been further explained: “(2) The tax credit under sub-section (1) shall be available subject to fulfillment of the following conditions, namely:- (a) return has been filed; (b) tax required to be deducted or collected has been deducted or collected and paid; (c) withholding tax statements for the immediately preceding tax year have been filed; and (d) sales tax returns for the tax periods corresponding to relevant tax year have been filed: Provided that nothing contained in this section shall preclude the applicability of section 214C or section 177.”
