SBP Updates Forex Regulations for IT Companies and Freelancers
The State Bank of Pakistan (SBP) has recently updated its laws on foreign exchange, with one significant change being the mandatory retention of 35 percent of the export revenues of information technology (IT) enterprises and freelancers in special foreign exchange accounts until March 31, 2023.
According to a statement released by the SBP, this decision was made in order to encourage IT businesses and independent contractors to bring their revenues in foreign currency back into the country.
In a circular, the SBP stated that the instructions will be evaluated in light of additional export performance by the IT industry and realization of export profits thereof throughout the aforementioned time. The SBP has also recommended that banks make digital channels available for the opening and maintenance of these accounts for the convenience of the IT industry.
Furthermore, the SBP has stated that financial institutions are able to provide the convenience of external remittance from the kept revenues through the issuance of company debit cards after undertaking the requisite due diligence.
However, in order to export software, these businesses are required to get registered with either the Pakistan Software Houses Association or Pakistan Software Export Board.
SBP Modifications Lead to Export IT and Raise Foreign Reserves of the Country
The SBP has also outlined a list of uses for the reserved cash, which includes legitimate business payments or costs incurred in a foreign country.
It is important to note that these modifications are intended to encourage new participants in the IT industry to focus on exporting and enable established exporters to improve their company, which would in turn provide job opportunities and raise foreign exchange revenues for the country.
In addition to the changes outlined above, the SBP has also suggested that financial institutions set up a system that would facilitate the prompt and efficient handling of consumer complaints.
Banks are obligated to appoint focal individuals at the head office level and to appoint an authorized officer at every branch that engages in the business of foreign exchange. This is to ensure that the exporters have a point of contact to discuss their ideas and concerns with.
The SBP has also made it clear that exporters may contact them for assistance with their transactions. The central bank has emphasized that these revisions are intended to provide an incentive for newcomers in this industry to concentrate on exports and will help existing exporters to develop their business, which will, in turn, provide job possibilities and improve the country’s profits in foreign exchange.
SBP’s Forex Updates a Boon for IT Industry and Freelancers in Pakistan
Overall, the SBP’s recent updates to its laws on foreign exchange have significant implications for the IT industry and freelancers in Pakistan. The mandatory retention of 35 percent of export revenues in special foreign exchange accounts is intended to encourage these businesses to bring their revenues in foreign currency back into the country.
The SBP has also recommended digital channels for the opening and maintenance of these accounts, as well as the issuance of company debit cards for external remittance.
Furthermore, the SBP has outlined a list of uses for the reserved cash, which includes legitimate business payments or costs incurred in a foreign country. The SBP’s efforts to provide job opportunities, raise foreign exchange revenues and improved consumer complaints handling is a positive step for the IT industry and freelancers in Pakistan.