Islamabad, June 28, 2025 – The Federal Board of Revenue (FBR) has announced a remarkable increase in tax collection on foreign payments made through debit and credit cards, reporting nearly a five-fold surge during the tax year 2024.
This significant boost highlights the effectiveness of recent enforcement measures aimed at improving documentation and expanding the tax base.
According to official data released by the FBR, advance tax collection from foreign payments jumped by 490%, reaching Rs17.43 billion in tax year 2024, compared to Rs2.96 billion collected during the previous tax year. This dramatic rise reflects the FBR’s focused efforts on curbing tax evasion and ensuring compliance through automated banking transactions.
The FBR collects advance tax on all foreign payments made via debit cards, credit cards, and prepaid cards under Section 236Y of the Income Tax Ordinance, 2001. This provision mandates every banking company to collect tax at the time of transferring funds outside Pakistan for purchases or payments involving international merchants and platforms.
Section 236Y states:
(1) Every banking company is required to collect advance tax at the time a credit card, debit card, or prepaid card transaction is completed with a foreign entity.
(2) The collected tax is adjustable against the final tax liability of the individual.
Currently, the rate of tax under Section 236Y stands at 5% of the total amount remitted abroad for individuals listed on the Active Taxpayers List (ATL). This measure aims to encourage taxpayers to remain compliant and ensure they benefit from lower deduction rates on their foreign payments.
FBR officials believe that this sharp increase in collections from foreign payments is a strong indicator of expanding digital transactions and better enforcement at the banking level. The payments made for online shopping, subscriptions, travel bookings, and other international services have significantly contributed to this revenue stream.
The FBR plans to further enhance monitoring and data integration with banks to streamline tax deduction on foreign payments, ensuring that all such transactions are appropriately recorded and taxed under the prevailing laws. The initiative underscores FBR’s commitment to strengthening the tax culture and ensuring transparency in foreign financial outflows.