Five little known but Important benefits for IT/ITeS companies in Pakistan
There are certain benefits for IT/ITeS companies in Pakistan. Most of them are unknown by most companies in Pakistan. I will briefly write on some of those benefits so you can start using them today.
# 1 — Yes You can Open a USD Bank Account
When you visit a bank and ask them to open a bank account in USD for your company, you will not be allowed to do so by the bank most of the time. However, there is a state bank rule which you can show to the bank to allow you to open a bank account in USD.
You can show this rule to bank to open the bank account. The only limitation is that whenever your inward remittance comes in, you will be only allowed to keep 35% of your earnings in it. You must be registered with state bank as exporter to avail this facility
You can check the rule here http://www.sbp.org.pk/fe_manual/chapters/chapter12.htm#12
#2 — Exchange Rate on Exports
Your export income is automatically converted into PKR by Bank accounts. This forces you to use the state bank rate. Furthermore, the banks charge anywhere from 30 paisa to 3 PKR per USD as their profit when converting your USD.
We at P@SHA have done some deals with banks like HBL where you get max 30 paisa deduction. However, it is still not enough. Here I would like to tell you about another secret which I myself came to know a few months back and this can be a big money saver for you.
Exporters can retain their export proceeds for a period of 3 days and they can sell to any authorized dealer. They don’t need to do it with their own bank at all. http://www.sbp.org.pk/fe_manual/chapters/chapter12.htm#7
“It is permissible for exporters to retain the export proceeds including ‘Advance Payments’ in foreign currency with an Authorised Dealer in Pakistan for three working days and to sell the same within this period to any Authorised Dealer. The foreign currency so retained shall be kept by the Authorised Dealers in ‘ Special Exporters’ Account’ outside their ‘Exposure’ limits.”
This simply means that they can get their export proceeds converted into PKR by a bank of their choice or a dealer in the open market.
Please note however that state bank registration as exporter is must for benefit #1 and benefit #2
#3 — Special Rate for Internet
All Software companies require high speed internet. The term used for this is CIR Internet which means it is not shared between users. Wi-tribe, Multinet and Mobilink have a deal for software companies which allows them to give 50% discount on their listed prices for IT/ITeS company registered with P@SHA. Using these deals you can get CIR Internet as low as 1300 PKR/MBps
#4 — Export Refinancing
There is a scheme where exporters can get loan from commercial banks for upto 180 days. This scheme is beneficial when you have an order to complete and you need financing for it. Normal rate for IT/ITeS is 11% however, you can get rebate of 0.5% to 1.5% based on your export performance. Please note that banks still require a collateral and IP (copyrights, trademarks) are not considered a collateral in Pakistan yet.
#5 — Software Parks
Buildings that have only software companies can be declared as Software Parks. This allows them to get industrial rate tariff which is significantly cheaper than the commercial rates. This is hugely beneficial for companies as it reduces the electricity bills for them especially data centers that require 24 hour electricity and cooling.
P@SHA is working with government to bring more benefits to IT/ITeS companies like subsidized long term financing rates, lower export refinancing rates, cash rewards for exporters, special economic zones for IT/ITeS companies, reduction of custom duties and subsidized electricity rates.
Barkan Saeed is the chairman of Pakistan Association of Software Houses (P@SHA)