FBR abolishes tax on digital goods, services

ISLAMABAD: The Federal Board of Revenue has abolished a 5% tax on digital goods and services provided through online platforms, ARY News reported quoting FBR.

The decision follows successful tariff negotiations with the United States to eliminate the tax imposed on foreign companies.

The tax, introduced just a month ago in the federal budget, applied to the supply of digital products and services.

According to an official notification issued here, the Digital Presence Procedures Tax will no longer be applicable to foreign digital goods and services.

Sources within the FBR indicate that the International Monetary Fund (IMF) will also be consulted regarding this decision. The tax exemption will take effect from July 1, 2025, as per the notification.

It is worth mentioning here that the Government of Pakistan introduced a new digital tax law that mandates taxation on earnings generated from YouTube, social media platforms, and various online services.

According to reports, income derived from audio, video, and music streaming services subjected to tax, along with other digital sectors.

The legislation also applies to telemedicine, e-learning platforms, cloud services, and online banking in Pakistan. Furthermore, e-commerce websites, online stores, and digital marketplaces will also fall under the scope of the new tax regulation.

Banks and exchange companies involved in transferring payments to foreign companies in exchange for goods or services will be required to deduct a 5 percent tax.

This tax must be deposited into the Pakistan national treasury by the 7th of each month. Failure to deduct or deposit the tax will result in legal action against the concerned financial institutions.

Under the new framework, all social media platforms operating in Pakistan are now obligated to submit quarterly reports to the government.