Export Proceeds Tax Reduced to 1.25% in Budget 2026-27
A boost for Pakistan's exporters
The Federal Budget 2026-27 has reduced the tax burden on export proceeds. The combined rate has been cut from 2% to 1.25%, lowering the cost for businesses that earn foreign exchange. For an export-led economy, this is a direct incentive to ship more and bring receipts home through formal channels.
How the old structure worked
Previously, exporters effectively bore a 2% charge made up of two parts: a 1% withholding tax on export proceeds and a 1% advance tax. The Finance Act 2026 consolidates the cost down to a single, lower 1.25% under the section 154 export framework of the Income Tax Ordinance 2001.
| Component | Old | New |
|---|---|---|
| Withholding tax on proceeds | 1% | 1.25% combined |
| Advance tax | 1% | |
| Total | 2% | 1.25% |
A worked example
Take an exporter who realises Rs 500,000,000 in proceeds during the year.
- Old burden at 2%: Rs 10,000,000.
- New burden at 1.25%: Rs 6,250,000.
- Annual saving: Rs 3,750,000.
That is working capital freed up to reinvest in raw materials, capacity or jobs.
Who benefits
- Manufacturers and traders exporting goods.
- Businesses competing on thin margins where every basis point counts.
- Firms that bring export receipts through banking channels and stay documented.
Stay documented to keep the benefit
The reduced rate rewards exporters who operate transparently. Keep realisation certificates, shipping documents and bank records in order so the lower export tax flows correctly through your return. Clean documentation is also your protection if a transaction is later reviewed by the FBR.
How Zaffre keeps exporters compliant
Exporters juggle proceeds, payroll, vendor payments and withholding all at once. Zaffre Axon from Zaffre Tech keeps these aligned with current FBR rates so nothing slips. The Zaffre HRM module auto-applies salary slabs, allowance taxability and EOBI across payroll, while Zaffretech finance tooling tracks withholding on invoices and supplier payments. Configured centrally on Zaffreaxon, your records stay consistent as rates change — including the new 1.25% export position — so your team spends time growing exports rather than chasing reconciliations.
References: Finance Act 2026 (Federal Budget 2026-27); Income Tax Ordinance 2001, section 154; FBR export tax framework.
Book a demo
See how Zaffre Axon keeps export, payroll and withholding compliant in one place. Book a demo with Zaffre Tech.