Prime Minister Imran Khan has approved several reforms aimed at promoting the development of the IT sector, self-employment and start-ups. The reforms included tax incentives and other fiscal and non-financial incentives.
It was approved at a meeting chaired by the Prime Minister earlier in the week and attended by officials from the Ministry of Information and Communication Technology, Pakistan Software Export Board (PSEB), State Bank of Pakistan, Federal Revenue Board, Special Technology Authority. and Ignite National Technology Fund. Also present at the meeting.
“A long-standing issue for IT companies regarding the ease of inflow/inflow of foreign currency in the form of specialized foreign currency accounts (FCY) for IT/ITES companies has been resolved and freelancers are being served for their operational needs. I have instructed PM IT/ITES companies and freelancers to maintain a 100% percentage of remittances received through their respective banking channels into foreign currency accounts without the need to convert them to PKR,” official press releases say.
In addition, by lifting restrictions, transfers abroad from a foreign currency account of IT companies registered with PSEB and self-employed people will be facilitated. The Prime Minister also instructed SBP to provide financial flows for the IT/ITES sector and the self-employed, taking into account the operational technical and production needs of these sectors. While the proposed reforms also suggested using registered businesses/freelancers’ USD balances as collateral for funding.
The Prime Minister also endorsed the Pakistan Tech Startup Fund’s recommendations to set up a venture capital fund through a public-private partnership. The official statement reads: “This fund is being created by the Ignite National Technology Foundation through a public-private partnership.”
The objectives and structure of the Fund include: (i) Providing seed capital to 30-50 startups annually, (ii) IGNITE invests Rs 500 million to Rs 1 billion annually, complemented by private investors. (3) Private venture capital operation (4) Invite Pakistanis abroad to participate in the fund.
The proposed reforms also included proposals to change the taxation system for IT companies, professionals and ITES. According to the published document, “the tax exemption for IT/ITEC companies and self-employed persons will be implemented for a period of 5 years in accordance with the amendment to the Income Tax Regulation 2001 by April 2022.”
The reforms represent an attempt by the government to encourage the IT sector and ITES to transfer their foreign remittances to Pakistan (which are currently in offshore accounts). While foreign companies and venture capital firms are also encouraged to invest in Pakistan, Pakistani start-ups will help create employment opportunities for the country’s skilled youth.
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