ISLAMABAD: The federal government has announced a wide range of tax measures in Budget 2025-26 to bring Pakistan’s rapidly growing digital economy—including online shopping, digital advertising, and foreign sellers—into the formal tax net.
Under the new proposals, a 5% tax will be applied to payments made to foreign vendors who sell goods or services to Pakistani customers through websites, mobile apps, or social media platforms, even if these companies have no physical office in Pakistan.
Finance Minister Muhammad Aurangzeb, while presenting the budget, said that the current tax system does not effectively cover cross-border digital trade. Many foreign vendors use courier services and receive payments through cash on delivery, yet pay no tax in Pakistan.
To deal with this issue, the government has proposed a new law called the Digital Presence Proceeds Tax Act, 2025. This law will allow the government to collect tax from foreign companies that do business in Pakistan through websites or apps, even if they don’t have a physical office here. Popular online platforms such as Amazon, AliExpress, Temu, and others that sell to Pakistani customers may now be taxed under this new rule.
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A 5% tax will be charged on payments made to these foreign sellers. The tax will be collected by banks, payment gateways, and financial institutions that process the transactions. Courier companies will also be required to make sure that tax has been paid before delivering imported goods, as per customs regulations.
In another key move, the government has also decided to tax digital advertisements run by foreign companies on platforms like Facebook, Instagram, YouTube, and other social media networks. These companies will have to pay 5% tax on the total amount they spend on online ads targeted at Pakistani users.
The payment processors and social media platforms must submit quarterly tax reports showing how much tax was collected and deposited. If these reports are not submitted on time, a penalty of Rs1 million will be charged for each missed quarter.
