Federal Board of Revenue (FBR) has explained the changes to Income Tax Ordinance, 2001 through Finance Act, 2017 and said that IT companies registered in July 2012 onwards can avail exemption under definition of start-ups.
In Income Tax Circular No. 04 of 2017 issued on Wednesday, the FBR said that the concept of start – ups has been introduced under Section 2(62A) in order to promote and encourage innovation and entrepreneurship in Pakistan, particularly in the field of Information Technology.
A start-up has been defined as a business set-up by a resident individual, AOP or a company having turnover up to Rs100 million in the last five tax years, registered and certified by the Pakistan Software Export Board (PSEB) as an information technology entity engaged in offering technology driven products or services to any sector of the economy.
For incentivizing start-ups, exemption has been accorded to profits earned by such entities in the tax year in which the entity is certified by PSEB and the subsequent two tax years.
“Existing undertakings engaged in similar businesses incorporated or registered on or after July 1, 2012 are also entitled to this exemption subject to certification by PSEB,” the FBR said. Furthermore, the Federal Government has also been empowered, through the Finance Act, 2017 to notify any business as a “start-up” subject to specific conditions.
Moreover, exemption has also been accorded to such “Start-ups” from levy of minimum tax under section 113 of the Ordinance as well as deduction of withholding tax upon receipt of payments specified in section 153 of the Ordinance.-Pkrevenue