State Bank codes to avail income tax exemption on IT Exports
Know your State Bank codes to avail income tax exemption on exports of Software & IT enabled Services
Income from exports of computer software or IT services or IT enabled services (ITeS) is tax exempt till the period ending on 30th June, 2016 (ref. Clause 133, Second Schedule, Income Tax Ordinance, 2011). IT Services are stated to include software development, software maintenance, system integration, web design, web development, web hosting, and network design.
Whereas IT-enabled services are stated to include inbound or outbound call centers, medical transcription, remote monitoring, graphics design, accounting services, HR services, telemedicine centers, data entry operations, locally produced television programs and insurance claims processing.
Pakistan Software Export Board (PSEB), with the support of the Ministry of Information Technology and Pakistan Software Houses Association (P@SHA) has proposed to the Federal Board of Revenue to extend the IT export income tax exemption till at-least 2020 in order to give Pakistan’s emerging IT industry time to mature. It is expected that the Government will positively consider the proposal and extend the tax exemption status till 2020 in the budget announcement for 2016-17.
However, in order to avail the IT/ITeS export income tax exemption, freelancers and IT businesses must properly report their foreign income receipts. This can be done easily. When receiving foreign remittances in your local currency bank account, whether you are an individual tax payer or a company, you need to inform your bank to use one of the following codes assigned by the State Bank of Pakistan (SBP) for IT related services. It is pertinent to mention here that export-oriented IT companies are permitted to retain amounts up to 35% of their export earnings in Special Exporters Foreign Currency accounts opened with the banks, exclusively for payment of commission/discount to the overseas agents/buyers and to use the same to meet other expenses such as promotional publicity, import of Hardware/Software, foreign consultant’s fee, etc.:
- No. SBP Code Category Description
1 9182 IT/Software Consultancy Services Receipts on account of IT and software development consultancy services provided through any medium (computer, mobile, other) whether onsite, offsite or online, to non-residents
2 9184 Computer Software Receipts on account of export of computer software including software licensing, maintenance and related support through any medium (computer, mobile, other) whether onsite, offsite or online, to non-residents. Also included are customized software development, maintenance and related support services
3 9185 Other Computer Services Receipts on account of other computer services not specified elsewhere, such as non-voice based IT enabled Services (ITeS) and Business Process Outsourcing (BPO) services
4 9102 Call Centers Receipts by PSEB registered call centers on account of voice-based call center services, such as telemarketing, tech support, customer interaction services etc.
5 9181 Hardware Consultancy Services Receipts on account of computer hardware consultancy services provided to non-residents
6 9183 Maintenance and Repair of Computers Receipts on account of maintenance and repair of computers and peripheral equipment abroad to non-residents
By doing so, you can claim export income tax exemption at the time of filing income tax returns by appropriately completing the tax return forms and attaching a letter from the bank listing your foreign receipts against IT services that have been duly reported by the bank to the State Bank of Pakistan during the last year along with copies of R-Forms. It is highly recommended that you engage an accountant familiar with tax laws to prepare and submit your tax returns.
It is also beneficial to get registered with Pakistan Software Export Board (PSEB) whether you are a registered company or a sole proprietorship (an individual whose NTN includes the name of solely-owned company). Registration with PSEB adds to your credibility as an exporter and adds value to your international marketing efforts. Furthermore, PSEB’s programs and initiatives provide you space and bandwidth in software parks, international certifications, free interns, linkages with local/international investors, and opportunities to participate in local/international IT exhibitions.