The Federal Board of Revenue (FBR) has announced that the newly introduced Digital Presence Proceeds Tax will not apply to goods and services ordered digitally from outside Pakistan. According to an official notification (S.R.O. No. 1366(I)/2025) issued on July 30, 2025, under Section 15 of the Digital Presence Proceeds Tax Act, 2025, the exemption covers all taxable digital supplies made by foreign entities. The notification specifies that this measure was taken under the authority of the Federal Government.
The FBR confirmed that “This notification shall come into force on and from the 1st day of July, 2025.” The order was signed by Dr. Najeeb Ahmad, Member (Inland Revenue Policy) and Additional Secretary.
Official sources have confirmed that the federal government, after consulting with the International Monetary Fund (IMF), has withdrawn the recently introduced five percent digital tax. According to officials from the Ministry of Finance, the tax was reversed to avoid discriminatory treatment, a concern raised by the IMF. The decision also came after opposition from the United States, which had objected to the tax on American digital companies.
The five percent tax was initially imposed in the recent Finance Bill on digitally ordered goods and services. However, a new FBR notification has now announced its withdrawal, effective from July 1, 2025. Officials stated that the government has not granted a new exemption but has simply reversed the new levy. The move is expected to benefit major global high-tech companies from countries like the United States and China.
Why This Reversal Is Important
- Relief for Consumers and Businesses: People and companies in Pakistan who depend on international digital platforms like Google, Netflix, Amazon Web Services, Zoom, or online learning services will no longer have to pay an additional tax under this law. This helps keep costs stable.
- Support for Freelancers and Tech Startups: Many freelancers and digital entrepreneurs in Pakistan use foreign software for their work. This exemption means they can continue to operate affordably without an added financial burden.
- Encouraging Digital Growth: By not taxing foreign digital services, Pakistan is signaling that it is open to and supportive of digital innovation and international collaboration.
- Boost to E-commerce and Remote Work: In a country where remote work, freelancing, and online businesses are expanding rapidly, this decision helps the digital economy stay competitive and connected to global markets.
