According to Ministry of Information Technology and Telecommunication (MoITT) sources, the Ministry believes it is necessary to re-align government strategies in order to attract a reasonable portion of global spending on outsourcing and freelancing services in Pakistan.
The government has put together an incentive package for freelancers. The package aims to expedite and simplify the opening of foreign currency bank accounts for registered freelancers, as well as to reduce tax rates and establish a free centralized VPN gateway service that will be whitelisted by Pakistan Telecommunication Authority (PTA) to provide services to verified freelancers registered with Pakistan Software Export Board (PSEB).
This will contribute to the creation of thousands of new jobs for freelancers in various sectors, in line with the current government policy of creating high-end, well-paying white-collar jobs for youth employed in the digital economy.
The Ministry has acknowledged that specific government incentives for freelancers are lacking, and that incentives for them are needed to create a favorable business environment. It is proposed that the incentives available to the IT sector also apply to the freelance sector.
In consultation with a working group of prominent freelancers and freelancing community representatives, fiscal incentives for freelancers have been recommended.
Following due process, the Ministry will recommend these proposals for inclusion in relevant documents such as the Finance Bill and the regulations of the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP) , among others.
Subject to receipt of income/revenue through formal banking channels in the specific purpose codes assigned by SBP, freelancers duly registered with PSEB will have an income tax holiday on export revenue until 2030.
Furthermore, PSEB will introduce an incentivized registration fee package for freelancers, as well as easier access to PSEB programs and initiatives, such as fee and subsidized training, certifications, subsidized office space at Software Technology Parks (STPs) across the country, and access to international marketing and matchmaking opportunities.
According to the proposal, SECP will offer a 20% registration fee discount to PSEB registered freelancers who register a single-member company.
It is proposed to make collateral-free loans of up to Rs. 1 million available to PSEB registered freelancers at subsidized rates through commercial banks and financial institutions.
It is proposed that PSEB registered freelancers have access to subsidized health and life insurance through existing and future government and private initiatives.
It is proposed that PSEB registered freelancers be included in any home loan schemes under existing and government and private initiatives, subject to providing a record of at least 5 years of freelancing export remittances of more than $10,000 per year.
These qualified freelancers will be provided with home loan facilities at a subsidized loan rate.
It is proposed that provinces and federal capital revenue boards implement a reduced sales tax rate of no more than 2% on local services revenue earned by PSEB registered freelancers. It is also proposed that this sales tax payment be due only at the end of the invoice month plus 60 days.
Among the non-financial incentives proposed is visa facilitation for PSEB registered freelancers whose export income/revenue for the previous three years exceeds $5000 per year and is remitted through formal banking channels.
Fast-track and simplified opening of foreign currency bank accounts for PSEB-registered freelancers, with 365 percent foreign exchange retention.
It is proposed that commercial banks establish technology business branches in at least six Pakistan cities where technology is aware, with SBP and commercial banks providing relevant training for the staff of these branches.
It is proposed that facilitation desks be established at PSEB offices and PSEB-operated Software Technology parks to help freelancers quickly resolve issues relating to taxation, banking, intellectual property rights, Voice over IP whitelisting, virtual Network Access (VPN), or any other legal or commercial matters.
It is also proposed that Revenue Boards for PSEB establish a free centralized VPN gateway service that the Pakistan Telecommunication Authority will whitelist in order to provide services to verified freelancers registered with PSEB.
IP whitelisting is proposed for voice over IP (VOIP) traffic for PSEB registered freelance, where VolP traffic must not exceed 200kbps.
It is proposed that ISPs/Telco operators provide Committed Information Rate (CIR) internet bandwidth service packaged under a work-from-home package with a minimum of 20 Mpbs connection at subsidized rates to PSEB registered freelancers.
To read our latest blog on “PM Imran Khan declares Tax-Free status for registered freelancers,” click here.
