If you receive a salary from a US employer by SWIFT, the honest answer comes before the bank comparison: the 0.25% tax rate does not apply to you, and no bank can change that. The 0.25% rate is Section 154A of the Income Tax Ordinance, and it covers export proceeds of IT and IT-enabled services earned by exporters registered with the Pakistan Software Export Board (PSEB). A salary is employment income. It is taxed under the salary slabs, whether it arrives from New York or from Lahore. What a bank can change is smaller but still worth money: the conversion margin on your dollars, how fast your money is credited, and whether your Proceeds Realisation Certificate (PRC) is issued properly.
Key facts:
- Section 154A rates are final tax on export proceeds: 0.25% for PSEB-registered IT service exporters on the Active Taxpayer List (ATL), 0.5% if not on the ATL, and 1% (2% non-ATL) for other exports of services. These rates run from tax year 2024 through tax year 2029.
- A resident of Pakistan is taxed on worldwide income. Foreign salary is declared under the salary head and taxed at the normal slab rates.
- Dollar retention in an Exporters' Special Foreign Currency Account (ESFCA), USD 5,000 per month or 50% of export proceeds, whichever is higher, is an SBP facility for IT companies and freelancers exporting services. It does not cover a salaried remittance.
- The PRC for any inward remittance is issued by the bank that realises the foreign currency. It is your proof of the receipt when you file.
The 0.25% question, settled
This confusion is everywhere in remote-work discussions, so let us be exact. Section 154A taxes the export of services: a Pakistani resident provides services to a foreign client, the foreign client pays from abroad, and the bank deducts tax when the proceeds are realised in Pakistan.
| Your situation | Rate under Section 154A | Character |
|---|---|---|
| PSEB-registered IT or IT-enabled services exporter, on the ATL | 0.25% | Final tax |
| Same, but not on the ATL | 0.5% | Final tax |
| Any other export of services, on the ATL | 1% | Final tax |
| Any other export of services, not on the ATL | 2% | Final tax |
| Employee of a foreign company, paid a salary | Not covered | Taxed under salary slabs |
PSEB registration cannot move you from the last row to the first. Registration certifies that you export IT services; it does not reclassify an employment relationship, and claiming export treatment for what is really a salary is a misdeclaration that surfaces the moment FBR compares your return with your employer's payments and your bank's purpose codes.
Employee or contractor: the test that decides everything
The label in your contract is not what decides this. The relationship is.
You are an employee, and your income is salary, if most of these are true: you work fixed hours set by the company, you work only (or almost only) for them, they control how you do the work, they provide the tools and systems, and you are paid a fixed amount every month regardless of deliverables.
You are a contractor exporting services, and Section 154A can apply, if most of these are true: you raise invoices, you are paid for deliverables or projects, you set your own hours, you can take other clients, and you bear the risk if work dries up.
If you are genuinely a contractor, the PSEB route is real and worth taking: get your NTN, register as a freelancer on the PSEB (Tech Destination) portal with your CNIC, NTN and proof of foreign income, open the PKR account and ESFCA your bank offers exporters, and make sure the bank tags your receipts with the IT services purpose code so the 0.25% rate is actually applied and a PRC is issued for every receipt. Our freelancer tax guide walks through the return side of this in full.
So how is a foreign salary actually taxed?
If you are tax resident in Pakistan (broadly, present in Pakistan for 183 days or more in the tax year), your salary from the US employer is taxed here under the salary head at the slab rates, like any other salary. Two practical points follow:
- Your US employer will normally not deduct Pakistani tax, so the liability is settled by you, in your own return. If the employer deducted US tax on the same income, a foreign tax credit may be available under Section 103 of the Ordinance, subject to its conditions. Keep the foreign payslips and withholding evidence either way.
- The bank crediting your pay in rupees does not change the head of income. Conversion is a banking event, not a tax classification.
What your bank actually does with a SWIFT salary
When a salary remittance arrives for a resident, the bank normally realises it in rupees and credits your PKR account at its buying rate for that day. This is why your US dollar account stays empty even though your employer sent dollars: a resident's ordinary foreign currency account is not the default destination for a salary remittance, and the dollar-retention facility described above belongs to exporters of services, not to salaried employees.
Within that reality, banks still differ, and the differences are worth checking before you move your salary:
- Conversion margin. Every bank converts at its own buying rate. On a monthly salary, a small difference in the rate is real money over a year. Compare the rate actually credited, not the interbank rate on a screen.
- PRC handling. Ask whether the PRC is issued automatically for each receipt and how quickly. You will need these certificates when you file, and chasing a year of PRCs in September is miserable. (If your remittance is routed through one bank and settled into an account at another, the realising bank is the one that issues the PRC, not your account bank.)
- Speed. For IT export receipts, the State Bank requires banks to process and credit within one working day. Salaried remittances follow general remittance processing, so ask about typical credit time for SWIFT receipts from the US.
- Purpose code. The purpose the bank records for your receipts should say what the money actually is. A salary wrongly tagged as service exports invites exactly the classification problem described above.
If your main goal is holding part of your income in dollars, understand that the lawful route to that is the exporter framework (ESFCA retention for genuine service exports), not a different bank for the same salary. Moving banks changes margins and service. It does not change the tax, and it does not unlock dollar retention for a salary.
Common mistakes
- Registering with PSEB as an "exporter" while remaining a full-time employee, and filing at 0.25%. The registration is easy to get; the classification is still wrong.
- Ignoring the salary entirely because "the bank already handled it". The bank handled the conversion, not your tax.
- Losing the PRCs and payslips. They are the evidence that connects your bank credits to your declared salary.
- Comparing banks on the exchange rate alone, then discovering your PRCs sit with the realising bank you left.
Frequently asked questions
Can I register with PSEB to get the 0.25% rate on my salary?
No. PSEB registration certifies IT service exporters. If you are an employee, your income stays salary whatever registrations you hold. If your arrangement is genuinely contracting (invoices, multiple clients possible, deliverable-based pay), then you are not receiving a salary at all, and the export route, including PSEB registration, is the correct one.
Which bank is best for receiving a US salary in Pakistan?
For a salary, the differences between major banks are modest: the conversion rate actually applied, how quickly SWIFT receipts are credited, and whether PRCs are issued without chasing. Ask those three questions at your current bank first. Bank choice matters much more for exporters, where the ESFCA, purpose tagging and the 0.25% deduction all depend on the bank setting your account up correctly.
Last updated: 19 October 2026
Disclaimer: This article is general information on Pakistani tax and banking practice, not advice for a specific case. Employment classification depends on your actual contract and working relationship. Rates are as per the FBR withholding rate card and State Bank instructions current at the date above.
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