Islamabad, July 30, 2025 – The Federal Government has announced that the newly introduced Digital Presence Proceeds Tax will not apply to digitally ordered goods and services supplied from outside Pakistan, provided they are already chargeable under the provisions of the same law.
This exemption, notified through SRO 1366(I)/2025 under Section 15 of the Digital Presence Proceeds Tax Act, 2025, will be effective from July 1, 2025.
The Digital Presence Proceeds Tax Act, 2025, enacted through the latest Finance Act, aims to bring foreign digital vendors into the tax net where they have a significant presence in Pakistan’s digital economy but no physical establishment. This legislation addresses the long-standing issue of multinational tech companies generating substantial revenue from Pakistani users without contributing to the national tax system.
The Act was introduced to respond to the global shift in business models, where companies operate extensively through digital platforms, interact with users, and generate profits without physical presence in market jurisdictions. As a result, countries like Pakistan have faced challenges in taxing such transactions under traditional rules based on permanent establishment.
However, recognizing the complexity of cross-border transactions and ongoing international negotiations for a unified global digital tax framework, the FBR has decided to exempt such transactions from the new tax for now.
The term “digital presence” as defined in the Act refers to any foreign entity offering digitally ordered goods or services to Pakistani users exceeding one million rupees annually, along with other qualifying factors like local currency billing and ongoing user engagement.
This exemption will offer relief to consumers and streamline cross-border e-commerce while the FBR continues to enhance its capacity for managing digital taxation and enforcing tax compliance from foreign vendors with active digital presence in Pakistan.