Govt to Impose 5% Tax on Local and International Tech Companies Generating Revenues in Pakistan
- Sara Habib
- June 11, 2025
- 10:04 am
- 38
- Current Affairs
Digital Tax Law is coming into force in Pakistan through the “Digital Presence” Proceeds Levy Act, 2025. This law introduces a 5% tax on payments made to foreign and local digital vendors. It applies to platforms like Amazon, Google, Facebook, Temu, Daraz, and PakWheels. Banks and financial institutions must deduct this tax before sending money abroad.
What the New Law Covers
This tax applies to both goods and services delivered digitally or physically. Streaming platforms, software companies, online courses, and even consultancy firms fall under this law. E-commerce platforms that help buyers and sellers connect, without owning the goods, are also included.
How the Law Will Be Enforced
All banks, fintechs, and payment gateways must deduct the 5% levy before making any payments to foreign vendors. They will also need to file quarterly reports with the Federal Board of Revenue (FBR). Payments to non-compliant vendors will be blocked.
Who Must Pay
Any foreign vendor that earns more than Rs. 1 million annually from Pakistani users will be taxed. Even without a physical office in Pakistan, they must comply if they collect local data, offer local support, or target ads at Pakistanis.
Penalties for Non-Compliance
Failure to follow this law will result in a Rs. 1 million fine per default. An extra 3% surcharge over the KIBOR rate will apply on overdue payments. If vendors still fail to pay, authorities can recover the tax under the Income Tax Ordinance, 2001. Remittances will be blocked for those who do not comply.
Right to Appeal
Vendors have the right to appeal tax orders. These appeals will go through the Commissioner of Inland Revenue (Appeals), following the current income tax system.
Unanswered Questions Remain
It’s still unclear how authorities will handle credit card payments for such services. Tax officials have not released detailed guidance yet.
