Tax Credit Regime and Specific provision for Startups.

  1. 7. Amendments of Income Tax Ordinance, 2001 (XLIX of 2001). - In the Income Tax Ordinance, 2001 (XLIX of 2001), the following further amendments shall be made, namely: -

            (27) after section 65E, the following new sections shall be inserted, namely: -

                        "65F Tax credit for certain persons. - (1) Following persons or incomes shall be allowed 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: -

                        (b)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;

(2)  The tax credit under sub-section (1) shall be available subject to fulfillment of the following conditions, where applicable, namely: -

(a) return has been filed ;

(b) withholding tax statements for the relevant tax year have been filed in respect of those provisions of the Ordinance, where the person is a withholding agent; and

(c) sales tax returns for the tax periods corresponding to relevant tax year have been filed if the person is required to file Sales Tax Return under any of the Federal or Provincial sales tax laws.

  1. Pat IV of the Income Tax Ordinance 2001, Exemptions from Specific Provisions

 

            [(43F) The provisions of section 153 shall not apply in the case of a start-up, being recipient of payment, as defined in clause (62A) of section 2.]

Source:

  1. Sub clause (27) of Clause 7 of the Finance Act 2021 dated June 30, 2021

https://download1.fbr.gov.pk/Docs/2021751375221891FinanceAct2021.pdf

  1. Clause 43F, Part IV, Second Schedule Income Tax Ordinance 2001

https://fbr.gov.pk/Categ/Income-Tax-Ordinance/326

Details
A PSEB registered startup business, which intends to offer technology driven products or services, and has turnover of less than one hundred million in each of the last five tax years, is eligible for a Tax Credit regime. There is no tax deduction from payments being made to startup for supply of goods, services, or contacts; provided exemption certificate under section 153 is submitted.
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