Islamabad, June 7, 2025 — The federal government is preparing to bring freelancers under the tax radar as part of major fiscal reforms in the upcoming budget for 2025-26, scheduled to be presented on June 10.
This initiative is aimed at regulating untapped digital earnings, especially those coming from abroad through freelancing platforms.
According to sources in the Federal Board of Revenue (FBR), the government, with the support of the State Bank of Pakistan (SBP), plans to identify and monitor foreign remittances received by freelancers working from Pakistan. These steps are intended to ensure fair taxation and improved revenue collection from the rapidly growing digital services sector.
The FBR has received detailed tax proposals from the Institute of Chartered Accountants of Pakistan (ICAP), which has recommended clearer definitions and a distinct tax treatment for freelancers and remote workers. ICAP emphasized that precise definitions must be included in the Finance Bill 2025 to eliminate ambiguity in the taxation of Pakistan’s IT workforce.
A freelancer, according to ICAP’s proposal, is a self-employed individual offering services to multiple clients without long-term contracts and managing their own taxes—typically paying 1% on foreign remittances, or 0.25% if registered with the Pakistan Software Export Board (PSEB). Freelancers may operate through online platforms or social media and must meet specific conditions regarding the number of clients and income thresholds to retain their classification.
Conversely, a remote worker is defined as someone employed by a single foreign or local company on a permanent contract and is already liable to pay taxes as a regular employee under existing tax laws. ICAP clarified that this definition does not introduce a new tax category but reinforces the applicability of current laws.
The goal of these definitions is to support evidence-based policymaking and allow the SBP to develop unique banking codes to separately track remittance inflows from freelancers and remote workers. This data will enable the government to assess digital earnings accurately and design better fiscal strategies.
By officially recognizing and taxing freelancers, the government aims to increase transparency, ensure fair tax contribution, and strengthen Pakistan’s digital economy in a structured, accountable manner. This step reflects a broader shift toward regulating the booming freelancing industry, which has remained largely informal until now.