FBR Goes After Freelancers | No IT Services Tax Exemption

FBR goes after Freelancers

FBR Goes After Freelancers.

Hey Readers. It’s been a while, and we have been away for a bit longer than before. But today we have a piece of essential news and something so important that we had to write about it. As you must have read, the FBR (Federal Bureau of Revenue) title has started after freelancers. But why? Freelancers are not earning that much. We get deductions way too often. We have to pay significant portions of our income multiple times before it even reaches our pockets.

Now FBR has created a new problem for the freelance industry. On 10th-March-2021, news started to erupt that FBR had begun a crackdown against Freelancers in Pakistan because of a press release by Payoneer. This news led to a digital protest against FBR and many negative remarks towards the Government organization. Let’s get into the details of why FBR is going after freelancers?

Why Is This Happening?

FBR Crackdown against freelancers

This story started on March-10th-2021 when the FBR discovered what they say is a massive scandal. FBR found that 60 billion PKR has been paid to 75,615 thousand Pakistan bank accounts through Payoneer over 2 years.

The details of the information are that in all these transactions, 27 Pakistani Banks were involved. 45,012 individuals who received the remittance were not registered with the FBR but could pay taxes and be registered with FBR. Another 17,985 filed income taxes but haven’t paid anything. The remaining 12,618 had NTN, but neither did they file for taxes nor pay any income tax.

No More IT Services Tax Exemption.

freelancer tax exemption

Previously FBR announced that till 2025 Pakistani IT services will be tax-exempted. But now it seems that FBR is withdrawing their statement, and directly they have sent notices to freelancers for not paying taxes.

On 12th-March-2021 FBR issued a notification in an attempt to clear the confusion. They stated that there is no proposal to remove the tax exemption on IT-enabled services. According to clause (133) of Part-I of the Second Schedule to the Income Tax Ordinance, 2001, if 80% of your IT-based income comes as remittance through a legal banking channel, you will still get a 100% tax exemption. Still, the person claiming tax exemption will be subjected to minimum tax on their turnover.

Original Post: FBR issues Clarification on tax exemption on IT services.

Response By Payoneer

response by payoneer

In an interview with techjuice, Payoneer has responded to these notifications from FBR. Payoneer straight up said that it is not their responsibility to make the business file their taxes. Every business is responsible for filing its taxes. Payoneer further stated that they do not report freelancer income, and it is not something they can do on behalf of local authorities.

Should Freelancers Be Alarmed?

Should Freelancers be alarmed

The short answer to this is No! because FBR themselves have not announced that they will lift the tax exemption on freelancers, but there are some rules and conditions to this tax exemption that we must follow. If you do not follow the rules and meet the conditions, FBR has determined for IT businesses. You will receive these notifications to file your taxes.

The main issues are from our mainstream media Channels like Geo and others have portrayed this as if FBR has uncovered a vast scandal. Yes, 60 billion PKR is a considerable number, and 75,615 individuals being involved is concerning. Still, the media is acting as if every freelancer is to be blamed, and all the freelancers were doing something shady, which is entirely untrue and unjust.

Final Conclusion

The short answer to this is No! because FBR themselves have not announced that they will lift the tax exemption on freelancers, but there are some rules and conditions to this tax exemption that we must follow. If you do not follow the rules and meet the conditions, FBR has determined for IT businesses. You will receive these notifications to file your taxes.

The main issues are from our mainstream media Channels like Geo and others have portrayed this as if FBR has uncovered a vast scandal. Yes, 60 billion PKR is a considerable number, and 75,615 individuals being involved is concerning. Still, the media is acting as if every freelancer is to be blamed, and all the freelancers were doing something shady, which is entirely untrue and unjust.

Final Conclusion

Right now, we can only say that the future of Pakistani freelancers is uncertain. This situation is very concerning, but as our Prime Minister says, “Don’t Panic (Bus Ghabrana Nahi).” The Government should find a way to identify the right culprits instead of labeling the entire industry. 

As per the statement of FBR, they have not lifted the tax exemption on IT exports, but the freelancers are viable to follow the rules to achieve the exemption. The Government should find ways to support this fastest-growing industry, not burden it before it gets a chance to impact our economy.

Pakistan is placed 4th in the list of Countries where the freelance industry is growing the fastest. Instead of taxing it and slowing down its growth, we need to find ways to provide infrastructure, more payment gateways, and more advanced education to speed up the development of this industry.

We hope you liked our blog post. For more news-related content, do visit our news category and do follow us on social media. We will be updating this blog post as we receive new updates on the matter. Thank you all for reading. We appreciate it.

By Faizan Elahi Qureshi

Student of Digital Marketing.