No Tax on IT Firms

[czed]

Firstly I would like to applaud the people who are running this website. Well done! Keep it up brothers. This website is just great!

I have two questions for taxation experts here please

1. I came to know that according to clause 133 of the ITO 2001, export of IT services is exempt from tax until the mid of 2016. Does that mean that ITS export companies in Pakistan don't need to get registered as a private limited company until 2016 or what?

2. What are the legal requirements of working as a freelance web developer for foreign clients in Pakistan?

I am new to taxation etc. and I would really appreciate any help from experts here in helping me understand this.

Thank you!

[czed]

Anyone?

[faisal_desperado]

Dear czed,

With regard to your first query, please note that the said section does not mean that you are not required to be registered, you may be registered as either sole properitor or form a Private/public limited company, and in all cases, you will also be required to file your income tax return, i.e. nil return.
The meaning of the said section is that, you are not required to pay income tax on profit of your business till the tax year 2016.

Concerning your second query, For working as a freelancer web developer, there is no such legal requirement, you may receive your consideration through western union or through hundi, however, to have a proper record of your every transactions, which you may present in legal way upon investigation, you should receive your amount through banking channel, i.e. through telegraphic transfer (Known as TT), for this, you should have a bank account at any bank in pakistan, ask for detail from your banker with regard to swift code, correspondence bank detail, local bank account number(where your account is), your account number etc. provide all these information to the sender and ask him to send wire through TT. (your bank will provide detail to you when you ask him to provide foreign remittence detail, give the exact information to the sender).

When bank receive TT, he will ask you to fill a form, that is "form R", show the purpose of remittence as "Export of IT Services" in the form so that the same will be treated as exempted and banker will not deduct withholding tax from your remittence. Take a certificate from the banker so that you may show the same to the tax department upon request.

The other question, which you asked me through email, will be replied to you by tomorrow due to scarcity of time. I apologize for being late in replying your queries.

Best Regards,

Faisal