Islamabad, July 19, 2025: Pakistan’s tax authority has told Google that it will not be charged the new 5% digital tax. This update was shared by the Federal Board of Revenue (FBR) with Google’s South Asia government affairs head, Kyle Gardner, according to a report by The Express Tribune.
The new law, called the Digital Presence Proceeds Act 2025, was passed in June to collect tax from foreign companies that operate online in Pakistan but have no physical setup here. But the FBR has now clarified that this tax only applies to companies that don’t have a local branch office.
Since Google has a registered branch in Pakistan, the FBR said the law does not apply to it. Google is one of the top contributors to Pakistan’s digital tax earnings, offering services like ads, search, cloud, and YouTube. In comparison, companies like Meta, Amazon, Microsoft, and Netflix pay far less.
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Under the existing law, Google was being taxed at 15% under Section 152 of the Income Tax Ordinance. But now, the FBR has told the company it may be taxed at only 5% for services managed from outside Pakistan.
The FBR also assured Google it would not face double taxation. A single transaction cannot be taxed under both Section 152 and the new digital law.
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As an added incentive, the government said that if Google moves its local branch to a Special Technology Zone (STZ), it can enjoy full tax exemption until 2035. This benefit falls under Clause 123EA of the Income Tax Ordinance.
The move has sparked debate over whether the digital tax law will work as planned, especially when major players like Google are being offered such relief.
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