Govt Introduces 5% Digital Tax on Foreign and Local E-Commerce Platforms
The federal government is set to enforce the “Digital Presence” Proceeds Levy Act, 2025, introducing a 5% tax on foreign and local vendors providing digitally ordered goods and services to Pakistani consumers.
Under the new law, platforms such as Amazon, Facebook, Google, Temu, Daraz, and PakWheels will be subject to this levy. The tax applies to both goods and services, whether delivered physically or digitally, and targets entities with significant digital presence in Pakistan—even if they lack a permanent establishment in the country.
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All banks, financial institutions, and payment gateways handling outward remittances to these vendors must deduct the levy at the source and submit quarterly statements to the Federal Board of Revenue (FBR). They are also required to suspend payments to vendors who fail to comply.
The tax covers a wide range of services including streaming, cloud computing, software, e-learning, online banking, consultancy, and design services, as well as e-commerce transactions conducted over digital platforms. Online marketplaces and e-stores that facilitate transactions without taking ownership of goods are also included.
A foreign vendor is considered to have a “significant digital presence” in Pakistan if their annual revenue from Pakistani users exceeds Rs. 1 million and they engage in any of the following:
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Local data collection
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Billing in PKR
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Local delivery or logistics
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After-sales services
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Pakistan-specific marketing
Non-compliance will attract a Rs. 1 million penalty per default, with a 3% surcharge above KIBOR per annum on overdue payments. Unpaid levies will be recovered under the Income Tax Ordinance, 2001, and remittance channels may be blocked.
Appeals can be filed with the Commissioner of Inland Revenue (Appeals) as per existing tax procedures.
However, authorities have yet to clarify how credit card transactions for such services will be regulated under this new framework.
