7.3 Software/ITeS/Freelance Exports & Incremental Retention
Key Takeaways
- EPD Circular Letter No. 06 of 2026 (6 April 2026) kept IT/freelancer retention at USD 5,000 per month or 50% of export proceeds, whichever is higher, and rewrote process: one-time service declaration, one-working-day handling, and no Form R on those export receipts.
- Authorized Dealers must credit the permissible ESFCA amount unless the exporter requests in writing, preferably at account opening, to retain less or none.
- Other legitimate services exporters under Chapter 12 paragraph 36 retain 35% of net foreign exchange earnings; Circular Letter 06 did not move them onto the IT test.
- Incremental retention under paragraph 37 is 50% of additional earnings only if net FX earnings in USD grew at least 10% versus last financial year, with FEOD permission on Appendices V-22 and V-23.
- Chapter 5 already covers ESFCA opening; this section is realization, retention, and utilization, including the one-working-day outward clock and the ban on transferring ESFCA to any other FCY or FE-25 account.
Realization and retention — not another account-opening lesson
Chapter 5 of this guide taught how Exporters’ Special Foreign Currency Accounts (ESFCAs) are opened, including concurrent opening with the primary PKR account and the BPRD Circular No. 1 dated 25 July 2025 onboarding framework. This section teaches how software, IT, ITeS, freelance, other-services, and incremental export earnings are realized, retained, and used.
Open current Chapter 12 paragraphs 12, 36, 37, and 40, then overlay EPD Circular Letter No. 06 of 2026 dated 6 April 2026 at https://www.sbp.org.pk/circulars/epd-circular-letter-no-06-of-2026 and its Annexure-A at https://www.sbp.org.pk/assets/documents/circulars/EPD-2026-CL6-Annex-I.pdf. Circular Letter 06 amended paragraph 12. It did not change the IT/freelancer retention numbers. It rewrote process: a one-time service declaration, one-working-day inward and outward handling, pass-through between banks, and no Form R on those export receipts. Do not contradict those process changes.
EPD Circular Letter No. 17 dated 23 October 2023 is the earlier instrument that raised IT / ITeS / freelance retention from 35% to 50% and put the USD 5,000 monthly floor into paragraph 12. EPD Circular Letter No. 02 dated 23 February 2024 rewrote paragraph 40 utilization for goods and services ESFCAs. Read 2023 and 2024 for history; answer 2026 process questions from Circular Letter 06’s annex.
Paragraph 12 after Circular Letter 06 — who is in, and how receipts land
IT companies (Annexure-A): sole proprietorships, partnership firms, and companies registered with the Pakistan Software Export Board (PSEB) or Pakistan Software Houses Association (P@SHA) and engaged in export of software, IT, and IT-enabled services.
Freelancers (Annexure-A): individuals resident in Pakistan who provide online services, including IT and ITeS, to international clients on a contract or project basis, without being employed by a single organization, and who receive payment for those services from abroad. That is tighter than a slogan that “anyone with PayPal is a freelancer.”
Inward processing — the Circular Letter 06 change:
- Obtain a one-time declaration of the nature of service at account opening, and from existing customers when required. Tag the offered service and the relevant ITRS purpose code to the account. Use that tag for reporting inward receipts unless the exporter declares a different purpose for a given remittance or the SWIFT message contains contrary details.
- IT companies and freelancers engaged in more than one service must tell the AD when an incoming remittance’s purpose differs from the tagged code.
- Process inward export receipts within one working day from receipt of funds where the exporter does not use the three-working-day shop-around in paragraph 7, or from receipt of a purpose-code change intimation.
- If the beneficiary maintains an account with a bank other than the receiving AD, the receiving AD passes the funds to the beneficiary’s bank within one working day. The beneficiary bank then credits the exporter within one working day of receiving those funds.
Form R. Annexure-A is explicit: IT companies and freelancers shall not be required to submit Form R to Authorized Dealers in respect of their export receipts. A leftover operations checklist that still demands Form R on every Upwork or marketplace receipt contradicts Circular Letter 06. Purpose-code reporting in ITRS remains. Monthly Appendix V-13 (software-export statement) still goes to FEOD, SBP-BSC. The covering letter also tells ADs to build an internal complaint mechanism so IT and freelancer files do not sit in a general queue.
Pre-2026 paragraph 12 still allowed freelancer proceeds on a self-declaration where contracts were unavailable, obtained once at account opening. Circular Letter 06’s annex replaces that workflow with the one-time service declaration and purpose-code tag. Teach the annex for current processing.
Locked retention numbers
| Exporter class | Retention (locked unless a newer circular you open changes it) | Who grants it | Circular Letter 06 effect |
|---|---|---|---|
| IT / ITeS / freelance (para 12 as revised 6 Apr 2026) | USD 5,000 (or equivalent) per month OR 50% of export proceeds, whichever is higher | AD must credit unless a written request to retain less or none, preferably at account opening | Numbers unchanged; one-working-day in/out; no Form R on those receipts |
| Other legitimate services (para 36) | 35% of net FX earnings | AD under paragraph 36 | Circular Letter 06 did not rewrite paragraph 36 |
| Incremental export earnings (para 37) | 50% of additional earnings | FEOD, SBP-BSC, Karachi on Appendix V-22 (bank-wise) and V-23 (consolidated) | Requires at least 10% USD growth versus last financial year; in addition to paragraph 35(iii) |
| Unused goods-export commission or discount (para 35(iii)) | Differential within the published FOB commission caps (for example up to 10% for “all other goods”) | AD | Separate bucket from paragraph 12 |
Worked IT / freelancer math:
- Month with USD 3,000 proceeds: 50% is USD 1,500; the published floor is USD 5,000. Credit USD 3,000 to ESFCA (you cannot retain more than arrived) unless the customer has written to retain less. Do not cap at 50% of 3,000.
- Month with USD 20,000: 50% is USD 10,000, which is higher than USD 5,000. Credit USD 10,000 unless a written opt-down exists.
A consultancy, logistics house, or engineering firm not covered under paragraph 12 does not receive the USD 5,000 / 50% test. Paragraph 36’s published examples include financial services, wholesale and retail distribution, logistics and transportation, storage and communications, telecommunication, medical, educational, engineering, real estate development, tourism, and technical testing and consultancy — not covered under paragraph 12. Those exporters retain 35% of net foreign exchange earnings in ESFCA.
Utilization — IT companies, freelancers, and paragraph 40
IT companies (Annexure-A). Balances may be used for all types of current-account payments for their own business (imports, acquisition of services from abroad, profit or dividend repatriation against registered shares, and similar) without SBP’s prior approval.
Freelancers (Annexure-A). Balances may be used for personal and work-related current-account payments (digital services, digital marketing, membership or subscription fees, certification, education, and similar) without prior SBP approval.
Capital and financial-account uses — equity investment abroad, foreign-currency loan repayments — still follow Chapters 20 and 19. Circular Letter 06 did not turn ESFCA into an unsupervised capital account.
Outward clocks in the annex (do not contradict them):
- Effect outward remittances from ESFCA within one working day of the customer’s request.
- If additional information or documents are needed, tell the exporter within one working day what is required, then process within one working day of receiving it.
- Process service acquisitions, including IT and digital services from abroad, on the customer’s request plus underlying agreement or invoice. If the payment travels through a digital channel, obtain those documents post-facto within three working days, preferably digitally.
Debit cards against ESFCA on specific request. No cash withdrawal from these accounts within Pakistan. Convert to PKR at any time on request. Funds cannot be credited or transferred to any other FCY account. Same-exporter ESFCA-to-ESFCA transfer across Authorized Dealers remains, and the transferring AD must ensure credit is to the same exporter’s ESFCA.
Paragraph 40, as amended by EPD Circular Letter No. 02 dated 23 February 2024 and printed in the current Chapter 12 PDF, remains the utilization spine for goods and other-services ESFCAs. Exporters may use retained funds freely for all types of current-account payments abroad for their own businesses without prior SBP approval, including:
- Own-business imports, still obeying the Import Policy Order and related laws
- Genuine shortfall or non-realization beyond the exporter’s control, with evidence satisfactory to the AD — the overdue is still reported on V-20; the adjusted amount appears on V-21. Misuse exposes the AD and the exporter under FERA
- Acquisition of services, including IT or digital services, without the Chapter 14 prior-designation requirement
- Dividends of domestic entities to overseas shareholders where shares are registered as repatriable with SBP
- Liaison, marketing, or representative office expenses under Chapter 20 paragraph 13
Capital-account payments from those ESFCAs still follow Chapters 19 and 20. Same debit-card, no-Pakistan-cash, no-other-FCY, same-exporter transfer, and PKR-conversion rules apply.
Paragraph 37 incremental retention — not a branch gift
Exporters who post at least 10% growth in net foreign exchange earnings in US dollar terms over the last financial year’s export performance may be allowed by FEOD, SBP-BSC Head Office, Karachi, to retain 50% of their additional export earnings in a foreign-currency account with Authorized Dealers in Pakistan. The exporter prepares a bank-wise Appendix V-22 showing previous and current financial-year performance, then a consolidated Appendix V-23 submitted to FEOD with V-22 originals for formal permission to retain 50% of additional earnings from future export earnings in the designated bank. The facility is in addition to paragraph 35(iii) unused commission or discount. A textile mill that grew 12% cannot instruct the branch to start 50% incremental retention this week without that FEOD permission.
Pakistani AD desk scenarios
Scenario A — Form R habit. Operations still demands Form R on every freelance receipt. Annexure-A: IT companies and freelancers shall not submit Form R for those export receipts. Tag the purpose code from the one-time declaration unless SWIFT or the customer says otherwise.
Scenario B — one-working-day miss. USD 8,000 hits Nostro Monday. The exporter is not using the three-day shop-around. Process by the next working day. Sitting on the funds until Friday “for extra compliance” contradicts the annex unless paragraph 7 applies.
Scenario C — intermediary bank. Funds arrive at Bank A; the freelancer’s accounts are at Bank B. Bank A passes within one working day; Bank B credits within one working day of receipt.
Scenario D — logistics exporter wants the IT test. The customer is not a PSEB or P@SHA IT exporter. Paragraph 36: 35% of net FX. Circular Letter 06 did not rewrite paragraph 36.
Scenario E — incremental without V-23. A goods exporter grew 12% in USD and wants 50% of the increment credited this week. Refuse until FEOD permission exists on V-22 / V-23.
Scenario F — ESFCA to personal FE-25. Forbidden. Same-exporter ESFCA at another AD is the permitted transfer.
Scenario G — digital SaaS debit. Freelancer pays a foreign tool from ESFCA through a digital channel. Process on request; collect agreement or invoice within three working days after the fact, preferably digitally.
Scenario H — cash dollars at the counter. No foreign-currency cash withdrawal from ESFCA in Pakistan. Debit card or outward remittance, not notes.
Scenario I — written opt-down. An IT company writes at account opening to retain none in ESFCA. The AD does not force the 50% / USD 5,000 credit. Without that writing, credit is mandatory.
Traps
- Saying Circular Letter 06 raised retention above 50% or above USD 5,000 per month
- Applying the paragraph 12 test to paragraph 36 services exporters
- Granting paragraph 37 incremental retention without FEOD V-22 / V-23 permission
- Requiring Form R on IT or freelancer export receipts after 6 April 2026
- Ignoring the one-working-day inward, pass-through, and outward clocks
- Transferring ESFCA to an ordinary FCY or FE-25 account
- Treating Chapter 5 account-opening as a substitute for these realization, retention, and utilization mechanics
Under EPD Circular Letter No. 06 of 2026 Annexure-A, which Form R treatment applies to IT companies’ and freelancers’ export receipts?
A PSEB-registered IT company receives USD 4,000 of export proceeds in a month and has not written to retain less. How much must the AD credit to ESFCA under current paragraph 12?
A goods exporter posts 12% growth in net USD export earnings versus last financial year and asks the branch to start retaining 50% of the additional earnings this week. What does Chapter 12 paragraph 37 require?