Islamabad, 10 June 2025: The federal government is gearing up to implement the “Digital Presence” Proceeds Levy Act, 2025, a landmark move aimed at taxing tech firms earning revenues through online operations in Pakistan.
This new legislation will apply to major international platforms such as Amazon, Google, Facebook, and Temu, as well as local e-commerce giants including Daraz and PakWheels, provided they deliver goods or services to Pakistani consumers.
Under the proposed law, all financial intermediaries banks, fintech companies, and payment processors will be obligated to withhold a 5% levy at the point of transferring payments abroad. This applies to digital sales of both physical products and online services.
Quarterly reports detailing such transactions must be submitted to the Federal Board of Revenue (FBR). More critically, payments may be suspended if vendors fail to meet filing or tax obligations under the law.
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These measures are central to the broader agenda of taxing tech firms earning revenues without a physical base in Pakistan but operating extensively within its digital space.
The new levy casts a wide net, covering services ranging from video streaming and cloud storage to software, remote learning, online banking, consultancy, and even digital architecture services.
Online marketplaces and e-stores facilitating sales regardless of whether they own inventory will also fall within the law’s ambit.
Notably, vendors with no brick-and-mortar presence in Pakistan can still be taxed if they maintain a “significant digital footprint.”
This includes collecting data from Pakistani users, marketing to local audiences, billing in local currency, offering home delivery, or providing after-sales support.
If annual proceeds from Pakistani users exceed Rs. 1 million, these companies will be considered liable under the Act marking a major shift in how tech firms earning revenues from cross-border digital commerce are treated.
For vendors that fail to comply, the law prescribes a Rs. 1 million penalty per violation, along with a surcharge 3% above KIBOR per annum on any overdue payments.
Enforcement will mirror procedures under the Income Tax Ordinance, 2001, allowing authorities to halt outward remittances for non-compliance.
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The law also provides a formal appeal process through the Commissioner of Inland Revenue (Appeals), aligning it with existing income tax protocols.
While the Act signals a decisive step toward taxing the digital economy, tax officials have yet to clarify how it will apply to credit card-based purchases, particularly those processed through global networks. Further regulatory guidelines are expected as authorities move to bring Pakistan’s digital commerce ecosystem within the formal taxation fold.
