FBR has introduced a 5% withholding tax on social media revenues received through banking and non-banking financial institutions under the Finance Act, 2026.
ISLAMABAD: The Federal Board of Revenue (FBR) has fixed a 5% tax deduction rate on income received from social media platforms for Tax Year 2027.
The FBR explained the new taxation mechanism in Circular No. 2 of 2026-27 (Income Tax), issued to highlight major amendments to the Income Tax Ordinance, 2001 introduced through the Finance Act, 2026.
Under the amendments, a new Section 154B has been inserted into the Income Tax Ordinance, establishing a specific withholding tax mechanism for revenues received from social media platforms.
Banks required to deduct tax on social media income
Under Section 154B, every banking and non-banking financial institution is required to deduct tax when crediting or receiving an amount in a person’s account if the amount represents revenue received from a social media platform.
The tax must be deducted at the rate specified in Division IIIAB of Part III of the First Schedule of the Income Tax Ordinance, 2001.
The provision covers income received by individuals and other persons from social media platforms, including revenues earned by digital content creators and social media influencers.
FBR fixes social media tax rate at 5%
The FBR has set the withholding tax rate under Division IIIAB at 5%.
The new provision applies to qualifying revenues received from social media platforms through banking and non-banking financial institutions.
The amended law also introduces definitions for terms including “digital content creator”, “social media influencer” and “payment” for the purpose of applying the new tax provisions.
Different tax treatment for residents and non-residents
The tax treatment under Section 154B depends on the taxpayer’s status.
For a resident person, tax deducted under Section 154B will be treated as minimum tax.
For a non-resident person who does not have a permanent establishment in Pakistan, the tax deducted will be treated as final tax.
This creates separate tax treatment for resident and qualifying non-resident recipients of social media revenues.
Section 169 amended for non-resident taxpayers
A consequential amendment has also been made to Section 169 of the Income Tax Ordinance, 2001 to give effect to the final-tax treatment applicable to qualifying non-resident persons.
The amendments therefore establish a dedicated withholding tax mechanism for social media income received through banking and non-banking financial institutions.
The new provisions form part of the broader tax changes introduced through the Finance Act, 2026 and apply for Tax Year 2027.