The “Digital Presence” Proceeds Levy Act, 2025, which the federal government is introducing, will levy a new tax on domestic and foreign vendors that provide digitally purchased goods and services to Pakistani consumers, including Daraz and Pak Wheels, as well as Amazon, Facebook, Google, Temu, and others.
All banks, financial institutions, and payment gateways that process payments to overseas vendors would have to deduct the charge at the time of external remittance.
Five percent of the total amount paid for goods and services is the tax rate. Additionally, these intermediaries are required to halt payments to non-compliant vendors and provide the Federal Board of Revenue with comprehensive quarterly statements.
As long as the foreign vendor maintains a sizable online presence in Pakistan, the tax will be assessed even if it does not have a physical location there.
Streaming platforms, cloud computing, software applications, online education, banking, consulting, and architectural design are all considered digitally delivered services under the new law. E-commerce refers to the buying and selling of goods and services using electronic networks.
Platforms like online marketplaces and e-stores that enable digital transactions without assuming ownership of the products are likewise covered by the Act.
The goal of the Revenue Division is to include digital transactions in the tax regime. Enforcing local tax rules on foreign platforms that operate in the nation is the goal.
The “Digital Presence” revenues Levy Act, 2025 states that the levy is often applied to the revenues of cross-border transactions involving the physical or digital delivery of goods or services.
If a foreign vendor’s yearly revenue from Pakistani users surpasses Rs. 1 million and they fulfill requirements like local data collection, billing in Pakistani currency, local delivery or logistics, after-sales services, or marketing campaigns that are specifically targeted at Pakistanis, they will be deemed to have a significant digital presence in Pakistan.
There will be a penalty of Rs. 1 million for each default if the filing or payment requirements are not met. Furthermore, outstanding sums will be subject to a fee of 3% annually above KIBOR.
The process described in the Income Tax Ordinance, 2001 will be followed in order to recover outstanding taxes. For non-compliance, authorities would stop outgoing payments to foreign vendors that are processed through local banks.
The Act gives the Commissioner of Inland Revenue (Appeals) the authority to challenge any tax collection order made under this law, in accordance with the current income tax procedures.
Tax officials have not yet made it clear how they plan to control the tax on credit card payments to domestic and foreign vendors made for the aforementioned services.
