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The IT and software industry in Pakistan is a rapidly growing export sector, contributing significantly to the economy. From software houses and SaaS startups to freelance development teams and offshore service providers, IT firms operate in a high-margin, project-based environment. However, many firms struggle to stay compliant with evolving tax laws, especially regarding exports, foreign remittances, and government certifications.

This article outlines the accounting and tax services IT and software firms need throughout the year to manage finances, stay compliant, and take advantage of tax incentives.

Why Accounting and Tax Services Are Crucial for IT Firms

  • Tracks project-wise and client-wise revenue

  • Monitors foreign remittances and export income

  • Ensures compliance with FBR, SECP, and PSEB

  • Supports investor due diligence and valuation for tech startups

  • Allows firms to claim tax exemptions and refunds properly

Monthly Services Required

1. Bookkeeping and Revenue Tracking

  • Record income from software development, maintenance, consultancy, and SaaS subscriptions

  • Reconcile bank statements, Payoneer, Wise, PayPal, and Stripe accounts

  • Categorize revenue by project, geography, or client

  • Maintain ledgers for salaries, tools, subscriptions, and infrastructure expenses

2. Payroll and Team Payments

  • Process employee and freelance developer salaries

  • Deduct payroll taxes under Section 149

  • Manage salaries in multiple currencies (USD, PKR, AED)

  • Maintain payroll records and payment schedules

3. Withholding Tax Compliance

  • Deduct withholding tax on vendor payments where applicable (e.g., rent, legal services)

  • Generate CPRs and issue WHT certificates

  • Ensure compliance under Section 153 and Section 155

4. Sales Tax Compliance

  • IT/ITeS services are exempt from sales tax if registered with PSEB

  • If not exempt, firms must file monthly sales tax returns

  • Maintain input/output tax records where applicable

  • File Nil returns or exemption-based returns properly

Quarterly Services Required

1. Management Reporting

  • Prepare client-wise or service-wise profit and loss statements

  • Monitor SaaS revenue, burn rate, and profitability

  • Analyze monthly recurring revenue (MRR), churn, CAC, and LTV

  • Provide dashboards or summaries for partners or investors

2. Advance Tax Payment

  • Estimate and pay advance income tax under Section 147

  • Adjust against year-end liability

  • Avoid penalties or default surcharge

3. Budgeting and Cash Flow Forecasting

  • Prepare expense forecasts for HR, cloud infrastructure, and R&D

  • Allocate resources for upcoming projects, renewals, or hiring

  • Plan for expansion or fundraising

Annual Services Required

1. Income Tax Return Filing

  • File corporate income tax return under Section 114

  • Declare all local and export income

  • Claim foreign remittances as tax-exempt if registered with PSEB

  • Submit wealth statement and personal returns for directors

2. Financial Statement Preparation

  • Prepare audited or management financial statements

  • Include P&L, balance sheet, and cash flow statements

  • Required for tax filing, funding rounds, or investor due diligence

3. SECP Annual Compliance (for Companies)

  • File Form A (Annual Return) and Form 29

  • Hold annual board meetings

  • Update corporate structure or registered office changes

4. Audit Support

  • Assist in preparing working papers for external audit

  • Provide documentation on foreign transactions, client contracts, and licensing costs

  • Comply with investor or grant audits

One-Time or As-Needed Services

1. Company and PSEB Registration

  • Register as a Private Limited Company or AOP

  • Obtain NTN and STRN from FBR

  • Register with Pakistan Software Export Board (PSEB) to avail export benefits

  • Get PSEB Exemption Certificate for tax-free export income

2. IT Export Tax Exemption and Compliance

  • Apply for tax exemption under Clause 133, Part I, Second Schedule

  • Maintain record of inward foreign remittances and bank certificates

  • Renew exemption annually with updated financials

3. Sales Tax Refund (if not exempt)

  • File for input tax refund on internet, cloud software, office rent, and electricity

  • Maintain supporting documents and vendor invoices

  • Use FASTER system or provincial portals

4. International Compliance for SaaS or Freelance Firms

  • Track income from international clients (US, UK, UAE, EU)

  • Maintain invoices, contracts, and remittance records

  • Comply with US 1099 forms or EU VAT obligations if applicable

5. Tax Planning and Financial Modeling

  • Structure operations to minimize global tax exposure

  • Build models for fundraising, startup valuation, or M&A

  • Plan for SAFE notes, equity issuance, or ESOPs

Recommended Accounting Software for IT and Software Firms

  • QuickBooks Online / Xero – ideal for SaaS and export-driven firms

  • Wave / Zoho Books – suitable for startups and freelancers

  • Synder / A2X / Stripe Atlas – integrations for global e-commerce and SaaS

  • Notion / Airtable / Trello – for internal finance tracking and reporting

Benefits of Outsourcing Accounting and Tax

  • Access to professionals experienced in IT export tax laws

  • Accurate tracking of multi-currency transactions

  • Avoids penalties, audits, and FBR notices

  • Provides investor-grade financial reports

  • Helps claim exemptions and refunds smoothly

Frequently Asked Questions (FAQs)

Q: Are IT firms in Pakistan exempt from tax?

Yes, export income from IT/ITeS companies registered with PSEB is exempt under Clause 133 until June 2025 (subject to compliance).

Q: Is it mandatory to register with PSEB?

It’s not mandatory but highly recommended to avail tax exemption and export recognition.

Q: What taxes are applicable to freelance or SaaS income?

Income from foreign clients is taxable if not exempted. Freelancers should file returns and may benefit from reduced tax on export proceeds.

Q: Can IT firms claim input tax refunds?

Yes, if not exempt, they can claim input tax paid on business-related expenses. Exempted firms usually file Nil returns or no input claims.

Q: Should SaaS or tech startups file sales tax?

SaaS services offered within Pakistan may attract sales tax under PRA, SRB, or KPRA unless exempt. Exported SaaS may be tax-exempt with proof.

Conclusion

IT and software businesses in Pakistan have unique accounting and tax needs that require specialized handling. Whether you’re exporting code, building SaaS platforms, or working as a tech freelancer, structured financial records and timely compliance help you scale, secure funding, and save on taxes. By working with experienced tax professionals and using smart tools, IT firms can remain audit-proof, investor-ready, and fully compliant in a rapidly evolving regulatory environment.

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