FBR abolishes digital tax, sparking a wave of relief across Pakistan’s booming online economy. In a major policy shift, the Federal Board of Revenue (FBR) has officially scrapped the controversial 5% tax on digital goods and services sold through online platforms.
The tax, which was introduced just a month ago in the federal budget, had sparked concern among foreign companies and local stakeholders alike. But after successful tariff negotiations with the United States, the government has pulled the plug on the levy.
According to an official notification, the “Digital Presence Procedures Tax” will no longer apply to foreign digital companies operating in Pakistan. The exemption will come into effect starting July 1, 2025.
This move signals a strategic recalibration. Sources within the FBR say the International Monetary Fund (IMF) will also be consulted to ensure the decision aligns with broader economic commitments.
The news has been welcomed by digital entrepreneurs, content creators, and e-commerce platforms. After all, FBR abolishes digital tax just as the country’s online economy was starting to feel the pinch.
Initially, the tax applied to a wide range of services—YouTube income, music and video streaming, social media monetization, and more. But it didn’t stop there.
The law also extended to telemedicine, online education, cloud computing, and digital banking. Even small e-commerce stores, freelancers, and payment gateways found themselves within the tax net.
Banks and exchange companies responsible for transferring payments to foreign entities were instructed to deduct 5% at source and deposit it into the national treasury by the 7th of each month.
Failure to do so? Legal action.
Even though FBR abolishes digital tax for foreign platforms, other elements of the digital tax framework remain intact. For instance, all social media platforms operating within Pakistan are now required to submit quarterly reports to the government.
That means greater oversight, tighter compliance, and new expectations for transparency—even in the absence of direct taxation on foreign digital players.
While the decision to remove the 5% tax has certainly been met with relief, especially among digital service providers and influencers, it raises key questions:
Will the government shift its focus to local platforms instead?
Will banks face more compliance risks under revised tax regulations?
For now, the message is clear: FBR abolishes digital tax, giving digital Pakistan a breather—but perhaps only a temporary one.
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