In a significant policy reversal, the Federal Board of Revenue (FBR) has announced that the newly introduced Digital Presence Proceeds Tax will not apply to digitally ordered goods and services supplied from outside Pakistan.
This announcement was made official through Notification S.R.O. 1366(I)/2025, issued on July 30, 2025, under Section 15 of the Digital Presence Proceeds Tax Act, 2025. The exemption came into effect retrospectively from July 1, 2025.
The move follows international concerns and strong opposition, especially from the International Monetary Fund (IMF) and the United States, regarding the 5% digital tax that was initially introduced through the Finance Bill 2025. Officials from the Ministry of Finance confirmed that the government decided to reverse the tax to avoid discriminatory treatment, a key concern raised by the IMF. The US had also objected to the tax’s implications for its digital companies.
The order, signed by Dr. Najeeb Ahmad, Member (Inland Revenue Policy) and Additional Secretary, clarifies that this reversal is not a new exemption, but rather a rollback of the previously introduced levy.
Why It Matters:
- Relief for Users & Businesses:
Consumers and companies in Pakistan using services like Netflix, Google, AWS, Coursera, Zoom, and other international digital platforms will not be charged extra tax, keeping access affordable and uninterrupted. - Boost to Freelancers & Tech Startups:
Thousands of freelancers, remote workers, and IT startups in Pakistan depend on foreign software tools. This tax exemption preserves their cost structures and supports continued growth. - Signal of Openness to Digital Innovation:
The decision sends a positive signal to global tech companies and aligns with Pakistan’s broader goal to become a hub for digital transformation and IT exports. - Encouragement for E-Commerce & Remote Work:
As Pakistan’s online economy grows, especially post-pandemic, this move supports cross-border digital trade and encourages remote work, online education, and global outsourcing.
