Can a PSEB-certified freelancer or startup get a 100% tax credit?

A full tax credit sounds too generous to be real, but section 65F of the Income Tax Ordinance does give one to a technology startup certified by the Pakistan Software Export Board (PSEB). It is time-limited to three tax years and tied to a narrow definition. It is also separate from the older 100% credit for IT export income, which was removed in 2022.

What does the law say?

The credit. Section 65F(1) allows listed persons “a tax credit equal to one hundred per cent of the tax payable under any provisions of this Ordinance including minimum, alternate corporate tax and final taxes for the period, to the extent, upon fulfillment of conditions and subject to limitations detailed as under”. Clause (b) covers “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”.

Who is a startup. Section 2(62A)(i) defines a startup as a business of a resident individual, AOP or company that:

Test	Wording in section 2(62A)(i)
Start date	commenced on or after first day of July, 2012
Activity	engaged in or intends to offer technology driven products or services to any sector of the economy
Certification	registered with and duly certified by the Pakistan Software Export Board (PSEB)
Size	turnover of less than one hundred million in each of the last five tax years

Clause (ii) adds any business the Board, with the approval of the Federal Minister-in-charge, specifies by notification. No such notification is held in this corpus.

Conditions. Section 65F(2) makes the credit available, “where applicable”, only if:

1. the return has been filed;
2. withholding tax statements for the relevant tax year have been filed, where the person is a withholding agent; and
3. sales tax returns for the matching tax periods have been filed, if the person is required to file them under any federal or provincial sales tax law.

Another startup relief. Clause (43F) of Part IV of the Second Schedule switches off the Ordinance’s withholding on payments for goods, services and contracts “in the case of a start-up, being recipient of payment, as defined in clause (62A) of section 2”. That matters if a startup also serves Pakistani clients who would otherwise deduct tax from their payments.

How does it work in practice?

The three-year window runs from the tax year of PSEB certification, not from when the business began. A business certified in tax year 2027 gets the credit for tax years 2027, 2028 and 2029, provided it still meets the definition and the section 65F(2) conditions each year.

For export receipts, section 154A contains no exception for startups, so the authorised dealer still deducts tax when the foreign proceeds are realised. A PSEB-registered software, IT or IT-enabled services exporter is deducted at 0.25% of proceeds under Division IVA of Part III of the First Schedule for tax year 2027. Section 65F(1) then gives a credit against tax payable “including … final taxes”. The Ordinance text read for this page does not spell out how a deduction already made is given back, so that is not covered here.

Worked example (illustrative figures)

Maryam started a one-person SaaS business in Lahore in September 2023. PSEB registers and certifies her as a startup in tax year 2027.

1. Start date: after 1 July 2012. Met.
2. Activity: technology driven services. Met.
3. Turnover in earlier tax years: Rs. 2,000,000 (2024), Rs. 6,500,000 (2025) and Rs. 11,000,000 (2026). Each is under one hundred million.
4. Foreign proceeds realised in tax year 2027: Rs. 10,000,000. Section 154A deduction at 0.25%: Rs. 10,000,000 x 0.25% = Rs. 25,000.
5. Tax payable for tax year 2027, all final tax: Rs. 25,000.
6. Section 65F credit at 100%: Rs. 25,000 x 100% = Rs. 25,000.
7. Net tax payable: Rs. 25,000 minus Rs. 25,000 = Rs. 0, if she files her return and any other returns and statements section 65F(2) requires.

Maryam’s business is only three tax years old at certification. The definition asks about turnover “in each of the last five tax years” and does not say how a younger business is treated. This page does not resolve that.

What if …?

What if my turnover crosses one hundred million? The definition requires turnover below that figure in each of the last five tax years. A year at or above it takes the business outside section 2(62A)(i). The definition does not say “rupees” after “one hundred million”, though the Ordinance generally works in rupees.

What if I am PSEB-registered as an exporter but not certified as a startup? Section 154A(1)(a) and the 0.25% rate depend on PSEB registration and certification as an exporter. Section 65F(1)(b) depends on meeting the startup definition and being certified as a startup. They are separate tests.

What if I miss the return deadline? Section 65F(2)(a) makes a filed return a condition. The Ordinance text here does not say whether a late return still satisfies it.

Common mistakes

• Relying on the old IT export credit. Clause (c) of section 65F(1), which covered IT export income, was omitted by the Finance Act, 2022. Only clause (b) for startups remains relevant to IT businesses.
• Counting three years from the start of the business. The window starts with the tax year of PSEB certification.
• Ignoring the filing conditions. Section 65F(2) applies them each year of the credit.

What to check in the official text

Read section 65F with its footnotes, section 2(62A), and clause (43F) of Part IV of the Second Schedule. Check section 154A and Division IVA of Part III of the First Schedule for the export deduction. PSEB’s certification rules and any Board notification under section 2(62A)(ii) are not held in this corpus.