Tax On Freelancers In Pakistan - 2025 Complete Guide

Freelancers in Pakistan are booming exponentially where thousands of professionals are earning and making international clients through various platforms including Fiverr, Upwork, etc. As the freelance fraternity is growing rapidly in the country, they must fully understand the tax on freelancers in Pakistan and how to stay compliant with FBR (Federal Board of Revenue) laws.

This comprehensive website will explain everything about freelancer tax in pakistan. It doesn’t matter whatever your queries are - whether it is about FBR registration procedure, income tax filing, tax rates, exemptions, or any other questions, we ensure you will be legally compliant and financially secure.

The Rise of Freelancing In Pakistan

There are approximately 2.37 million freelancers currently pursuing freelancing as their full-time career. This large number of people make Pakistan rank among the top countries globally for freelancing services. The sector is also heavily contributing to the GDP of the country. In the light of this massive transformation year-by-year, the Government of Pakistan and FBR have issued clear guidelines for freelancer income tax and foreign income declaration, ensuring fair contribution to the economy.

Do Freelancers In Pakistan Have To Pay Tax?

Yes of course! As per the Income Tax Ordinance 2001, every type of freelancers in Pakistan has to pay a certain amount of tax if their annual income exceeds Rs. 600,000.

Key Points:

• The tax-free income limit for FY 2025-2026 is Rs. 600,000 per year.

• Any income above this threshold is taxable under FBR rules.

• People earning foreign earnings from any freelance platform will be declared as foreign-sourced income under Section 10 of the ordinance.

• If you are registered with PSEB (Pakistan Software Export Board), you will have to pay 0.25% tax on gross earnings.

• Non-registered companies and individuals have to pay 1% of gross earnings.

Tip For Beginners:

PSEB is a government organization that supports the IT and ITeS industry. It plays a major role in supporting businesses, necessary collabs, and providing other necessary services and facilities. You can not only get your tax percentage reduced but also avail various global programs, certifications, and subsidies.

Types Of Taxes Freelancers Must Pay

A freelancer has to pay some of the following taxes on freelance income in Pakistan:

Foreign Income And Tax Exemption For Freelancers In Pakistan

Freelancers of Pakistan collaborating with foreign companies or clients and earning from them is termed as foreign income. Payments received from authorized platforms including Fiverr, Upwork, Freelancer.com, or from any other source will be termed as income received from export of services. Under certain conditions, freelancers can enjoy full tax exemption from the FBR.

Conditions For Tax Exemption On Foreign Income

In some circumstances, tax can be exempted on IT and software export services if freelancers meet specific FBR and PSEB requirements.

Eligibility Criteria For Tax Exemption

• Income must be from foreign clients and be transmitted using official banking channels.

• At least 80% of your income should be from software and IT exports.

• Must be registered with PSEB

• Must declare your income in your annual FBR tax return under the “foreign source income” section

• Keep record of documented proof of remittance

Official Registration Required For Exemption

A freelancer must be registered by government authorities to avail the exemption. You must be registered with:

• FBR

• PSEB

• SECP (optional)

Local Income And Tax Exemption For Freelancers In Pakistan

Any payment that is made by clients or organizations based in Pakistan to a freelancer will be considered a local income. If the client is registered in Pakistan and the payment is made through a local bank, it will be considered local and is taxable under FBR rules.

Conditions For Tax Exemptions On Local Income

Unlike foreign income, local freelance income is not eligible for 100% exemption rate. Although, local freelancers can still avail special reliefs and exemptions.

Eligibility Criteria For Partial And Conditional Exemptions

• Such freelancers who are earning below Rs. 600,000 annually are fully exempted from income tax

• Partial exemptions can be claimed by IT service providers/freelancers on export related activities

• Some provincial authorities offer lower sales tax rates or rebates for registered freelancers

• Women entrepreneurs/freelancers also enjoy decreased tax percentage if registered under government schemes

Tips For Beginners:

It doesn’t matter if you are earning under the FBR’s proposed threshold, you must declare your income annually. Local freelancers are obliged for sales tax registration if your income exceeds the provincial threshold. Expenses related to your freelance work can also be deducted from table income, so you must maintain a record of your expense receipts and invoices. These expenses may include office rent, electricity/internet/utility bills, hosting fees, travel expenses, professional services, etc.

Benefits Of Being A Tax Filer Freelancer

Let's become a tax filer in Pakistan and enjoy various long-term advantages.

• Enhanced financial credibility

• Smoother visa processing for freelancers

• Gain tax filer status verified by FBR

• Eligible for credit cards and business loans

• Avail government incentives for IT exports

Common Mistakes Freelancers Should Avoid

It is a common practice of newbies and starters in the freelance world to ignore tax filing. However, paying the tax and becoming a filer can benefit your business and professional life and increase the trustworthiness of your services.

Some practices that must be avoided by every freelancer are:

• Ignoring to file annual tax return

• Giving no importance to FBR registration

• Missing filing deadlines (September 30th)

• Using personal bank account for freelance income

• Believing freelance income is tax-free

FAQS

1. Do freelancers have to pay tax in Pakistan?

Every freelancer in Pakistan has to pay tax on their income exceeding Rs. 600,000 annually. This rule will be applied to both local and foreign income. However, such freelancers who are providing IT and software export may claim 100% tax exemption only if they get registered by PSEB and file their returns through FBR IRIS portal.

2. What is the minimum income for freelancers to become taxable?

Those individuals or freelancing companies earning below Rs.600,000 per year are not eligible to pay income tax in Pakistan. But still they need to get registered with FBR and file a nil tax return to remain on the ATL (Active Taxpayers List) and avail lower withholding rates.

3. How can freelancers register with FBR in Pakistan?

They can easily get registered online through the FBR website by following the below steps:

• Go to the FBR IRIS Portal

• Create a new account using your CNIC and mobile number

• You will get your NTN (National Tax Number

• File your annual tax return under Income for Business or Profession

• Tip: If your income is in exempted range, it is highly recommended to claim the exemption officially.

4. How do freelancers file their annual FBR tax return?

To file your annual tax return:

• Log in to FBR IRIS Portal

• Click on Income Tax Return (Individuals)

• List down your income details (local and foreign)

• Declare expenses and tax deductions

• Submit and download your acknowledgement

5. What happens if a freelancer does not file taxes in Pakistan?

If you are not filing your taxes or unable to file it, you may face:

• Increased WTH Tax up to 2x higher than normal rate

• Difficulty in visa processing

• Unable to get loan approvals

• Removal from ATL

• Legal notices or penalties from FBR

When you file your tax return regularly, your record remains clean and makes you eligible to process your other legal proceedings easily.

6. Can freelancers deduct expenses to reduce taxable income?

Yes, freelancers can make a list of legitimate business expenses and claim it such as:

• Laptop and software license costs

• Internet bills

• Office rent

• Utility bills

• Marketing and domain expenses

• Travelling cost, etc

These deductions reduce your taxable income, resulting in lower tax liability.

7. What are the benefits of being on the Active Taxpayers List (ATL)?

Being on the FBR Active Taxpayers List will let you enjoy various advantages including:

• Reduced tax on bank transactions

• Compliance benefits for international clients

• Special treatment in loan applications

• Eligible for government IT programs

8. Is it mandatory to declare both local and foreign income?

Absolutely yes. You must have to mention every source of income in your tax return, either local or foreign. If you intentionally or unintentionally skip any, it will lead to FBR audit or scrutiny.

9. Can freelancers operate without registering a company?

Most of the freelancers in Pakistan work as individuals and don't require any registration. But those who are earning a significant amount or working with companies must register with SECP for added credibility.

10. Can I file my own tax return?

Of course, using FBR IRIS. You can also hire a tax consultant to ensure accuracy.

11. How can I avoid double taxation on foreign income?

You must receive payments through official channels like Payoneer or bank transfer and declare it as foreign sourced income.

12. Are there any future tax policy changes for freelancers?

As of Tax Year 2025, the foreign income tax exemption for IT and software exports remains active, but it may be revised or extended in upcoming budgets. Freelancers should stay updated with the latest FBR notifications and PSEB circulars to remain compliant.

FBR Registration Process For Freelancers

While every freelancer has to pay the FBR tax, he/she should be a registered tax filer. To become a registered candidate, freelancers must register with the FBR and acquire a National Tax Number (NTN).

1. Go to the website https://iris.fbr.gov.pk

2. Select the option Registration for Unregistered Person.

3. Fill in the requirements by entering your CNIC, mobile number, and email address.

4. Verify your identity through OTP.

5. Complete the registration form under “Business Activity: IT/Software/Online Services”

6. Submit the form and download your FBR Registration Certificate

How To File Tax Returns As A Freelancer In Pakistan

We are providing a step-by-step guide to file your income tax return for freelancers in Pakistan. Although it is a simple procedure if you opt for the FBR IRIS portal.

1. Login to IRIS Portal

2. Go to Declarations → Income Tax Return (Tax Year 2025)

3. Fill the sections for:

   1. Foreign Income

   2. Expenses (internet, equipments, office use, etc)

   3. Tax credits or deductions

4. Attach the proof of freelance income and bank statements

5. Review the details thoroughly

6. Click Submit Return and download the Acknowledgement Receipt

Tax Rates For Freelancers In Pakistan (FY 2025 - 2026)