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PSEB and IT export

Exemption and Lower Rate Certificates

Section 159 lets the Commissioner issue an exemption or lower rate certificate where income is exempt, is subject to a lower rate than the First Schedule provides, or carries a hundred per cent tax credit. A company gets a decision within fifteen days and automatic issuance by Iris if none comes. An individual or association has neither: no deadline and no deemed issuance.

We do this for clients:Tax Advisory and FBR Representation in PakistanPSEB Registration in Pakistan

Where these figures come from

Statutory basis
Income Tax Ordinance, 2001, as amended by the Finance Act 2026, for tax year 2027 (1 July 2026 to 30 June 2027).
Last checked against the statute
by BarrioVibe, which files income tax returns through FBR IRIS.

These figures are an estimate computed from the rates above, not tax advice for your situation. Your return depends on facts a form cannot see, so treat the number as a starting point and speak to us before you file on it.

The three grounds, and they are narrow

Section 159(1). The Commissioner has to be satisfied of one of these; a certificate is not a discretionary favour and it is not available simply because withholding is inconvenient.

  • The income is exempt from tax under the Ordinance
  • The income is subject to tax at a rate lower than that specified in the First Schedule
  • The income is subject to a hundred per cent tax credit under the Ordinance, widened from the previous reference to section 100C by the Finance Act 2021

Where it does work

The clearest case is exempt income. Where the income genuinely falls outside the charge, the first ground is satisfied on its own terms and a certificate stops a withholding agent deducting from something the Ordinance does not tax.

Section 159(1A) is a separate and narrower route worth knowing: on application by a person whose income is not likely to be chargeable to tax, the Commissioner shall issue an exemption certificate for profit on debt under section 151(1)(c). That is aimed at someone below the threshold having tax deducted from bank profit, and it is a different provision from the general certificate.

The cross-reference that matters more for an IT exporter

If you are PSEB-registered and reading this to reduce withholding, the more valuable provision is probably not section 159 at all. Section 154A(2) conditions final tax treatment on having filed your return, your withholding statements under section 165 where required, and your sales tax returns where required, with a proviso disapplying the sales tax condition for clause (a) exporters.

So the thing protecting your 0.25 per cent position is compliance with the statement obligations rather than a certificate. A missed section 165 statement is a live risk to final tax treatment in a way that most exporters do not realise, and that is worth more attention than an application the Commissioner has no deadline to decide.

Questions

The questionspeople ask

  • What is a section 159 exemption certificate?

    A certificate from the Commissioner directing that tax be deducted at a lower rate, or not at all, where the income is exempt, is taxed at a rate lower than the First Schedule provides, or carries a hundred per cent tax credit. Section 159(2) requires the withholding agent to comply with it.

  • Does the Commissioner have to decide within fifteen days?

    Only for a company. The provisos to section 159(1) say the fifteen-day deadline and the deemed automatic issuance by Iris apply in the case of a company and by the aforesaid company. For an individual or association there is no statutory deadline and no deemed issuance.

  • Can a section 159 certificate reduce my 4% IT services withholding?

    Usually not. Section 153(3) makes that deduction minimum tax for a resident, and a minimum tax is a floor rather than a rate, so the ground requiring a lower rate than the Schedule is generally not available. The section covers Division III of Part V, so the obstacle is the nature of the charge rather than jurisdiction.

  • How long is a section 159 certificate valid?

    There is no general statutory period. The form carries a validity field so the duration is set per certificate. The exceptions are sections 159(1C) and (1D), inserted by the Finance Act 2026, which provide for a whole tax year in specific cases, and section 159(1B) for a once in fifteen years certificate on a personal residence.

  • Can I get an exemption certificate for bank profit?

    Section 159(1A) is the route. On application by a person whose income is not likely to be chargeable to tax, the Commissioner shall issue an exemption certificate for profit on debt under section 151(1)(c).

  • Is the section 145 certificate the same thing?

    No. Rule 223 prescribes a tax exemption certificate under section 145 for a person leaving Pakistan. It is a different instrument, and it is the one most likely to come up first when searching FBR's Rules.

  • Do I show the certificate to my client or to FBR?

    To the person paying you. Section 159(2) requires the withholding agent to comply with it, so it operates as an instruction to them, and it needs to be in place before the payment rather than produced after tax has already been deducted.

  • What protects my 0.25% export rate if not a certificate?

    Compliance. Section 154A(2) conditions final tax treatment on having filed your return, your section 165 withholding statements where required, and your sales tax returns where required, with a proviso disapplying the sales tax condition for clause (a) exporters.

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