Freelancers are providing their services by using different online platforms to various clients in all over the world. Freelancers are self-employed persons and are making money on project to project basis. Freelancers charge their work on hourly rates or on fixed charges depending on project type.
Freelancing market in Pakistan is growing day by day. Pakistan is ranked on 4th place in the international freelancing market according to Payoneer Report “The Global Gig-Economy Index”, 2020.
Since most of the Freelancers are providing their services to international clients, therefore, these services fall under the category of export of services. As per Income Tax Ordinance, 2001 income from export of computer software or IT services or IT enabled services are exempt from payment of Income Tax up to June 2024. However there is a conditions to such exemption that eighty per cent of the export proceeds is brought into Pakistan in foreign exchange remitted from outside Pakistan through normal banking channels. So Freelancer should be careful while determining the method of receiving funds. They should ask their clients to remit the funds in foreign currency (i.e. US Dollars or Euros or Pounds etc.) to their respective local bank accounts in Pakistan. Further, Freelancers should take Proceed Realization Certificate from their banks as a proof of foreign remittance.
Exports of services which are exempt are computer software, IT Services and IT enabled services. IT Services include software development, software maintenance, system integration, web design, web development, web hosting, and network design, and IT enabled services include inbound or outbound call centers, medical transcription, remote monitoring, graphics design, accounting services, HR services, telemedicine centers, data entry operations, locally produced television programs] and insurance claims processing.
Usually freelancers face hurdles in opening bank account because some banks refuse or demand extra documentation to open bank accounts of freelancer. To resolve these types of issues freelancers can register their business as sole proprietor, partnership firm or the company, as the case may, then they can obtain National Tax Number (NTN) of their business. After obtaining NTN it would be easy to open bank account. By submitting annual return of income tax, freelancers can got the status of active tax payer (Filer) and enjoy different benefits of Filer.
MaxGrowth Consultants are providing professional services to Freelancer to comply with the legal requirements of registration of their business and compliance with taxation requirements.
