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FBR to Charge 4% Withholding Tax on IT Services in FY26

FBR to Charge 4% Withholding Tax on IT Services in FY26

The Federal Board of Revenue (FBR) has announced that it will charge a 4% withholding tax on IT services for the fiscal year 2026 (FY26). This new tax policy is set to impact both local and foreign service providers offering IT services in Pakistan. The decision has drawn attention from the IT industry, which is one of the key sectors driving the country’s economy.

The 4% withholding tax will be levied on payments made for IT services, including software development, digital marketing, and other related services. The FBR’s move aims to increase tax revenue from the rapidly growing IT sector. This tax policy is part of the government’s broader strategy to enhance the country’s tax collection efforts and broaden the tax base.

The IT sector has been one of the main contributors to Pakistan’s economic growth in recent years, and the introduction of this withholding tax is expected to have both positive and negative effects. On one hand, the government hopes the new tax policy will help improve tax compliance in the sector. On the other hand, IT businesses and professionals are concerned that the 4% withholding tax could increase their operational costs and potentially hinder growth, particularly for small businesses.

The FBR’s decision to charge a 4% withholding tax on IT services in FY26 could also affect foreign companies providing services to Pakistani clients. With the global nature of the IT industry, this tax could lead to increased costs for international service providers, which may eventually be passed on to customers in Pakistan.

Overall, FBR to charge 4% withholding tax on IT services in FY26 marks a significant shift in the country’s taxation policy. As the tax will apply to both domestic and foreign IT service providers, it could lead to changes in how business is conducted in the sector. The full impact of this new tax will become clearer in the coming months as businesses adjust to the new rules.

Read Also : FBR Introduces Green Tax to Boost Electric Vehicles

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