ISLAMABAD: The government is preparing to roll out a new tax regime under the Digital Presence Proceeds Levy Act, 2025, as part of the upcoming budget for the fiscal year 2025-26. The legislation aims to bring foreign and local digital vendors under Pakistan’s tax net.
The proposed law will impose a 5% levy on payments made to companies supplying goods or services digitally to consumers in Pakistan. This tax will apply to global tech giants—including Amazon, Google, Facebook, Netflix, and Temu—as well as local e-commerce platforms such as Daraz and PakWheels.
The levy will cover all digitally ordered goods and services, regardless of whether they are delivered physically or online. Banks, financial institutions, and payment gateways processing remittances to foreign vendors will be required to deduct the levy at the time of payment and submit detailed quarterly reports to the Federal Board of Revenue (FBR).
The Act establishes that the tax will be applicable even if foreign vendors lack a permanent establishment in Pakistan, provided they maintain a significant digital presence—defined as annual proceeds exceeding PKR 1 million from Pakistani users and meeting conditions such as local billing, logistics, data collection, after-sales services, or targeted marketing efforts.
The legislation extends to digitally delivered services, including streaming platforms, cloud computing, software services, online learning, digital banking, consultancy, and architectural design. It also covers online marketplaces and e-stores facilitating transactions without owning the goods.
Non-compliance with filing or payment requirements will result in a PKR 1 million penalty per default, along with a surcharge of 3% above KIBOR per annum on overdue amounts. Authorities will block outward remittances via local banks for foreign vendors failing to comply with tax regulations.
The recovery process for unpaid levies will follow procedures outlined in the Income Tax Ordinance, 2001. Additionally, businesses will retain the right to appeal tax collection orders through the Commissioner of Inland Revenue (Appeals), in accordance with existing income tax procedures.
With this initiative, the FBR aims to integrate digital transactions into Pakistan’s tax system and enforce local tax laws on international platforms operating within the country.