Karachi, June 30, 2025 – The Finance Act, 2025 has formally introduced a new definition of digitally delivered services within Pakistan’s income tax framework, marking a major step toward taxation of online and internet-based transactions.
Through this Act, a new clause — 17C — has been inserted into Section 2 of the Income Tax Ordinance, 2001, laying out a comprehensive explanation of what constitutes digitally delivered services. This move is part of the government’s broader efforts to bring digital transactions and remote services into the formal tax net, ensuring that revenue is captured from the rapidly growing online economy.
According to the newly added definition, digitally delivered services refer to any service that is delivered through the internet or an electronic network, where the process is automated and requires little to no human involvement. Examples include music and video streaming platforms, cloud-based computing, online software application subscriptions, services delivered via telemedicine platforms, e-learning portals, online banking interfaces, architectural design and planning shared through digital files, research and consultancy output shared electronically, and even accounting services in downloadable digital formats.
The inclusion of these provisions means that both local and foreign entities offering such services in Pakistan’s digital space may now fall under the tax net, provided the services delivered are consumed by Pakistani users or businesses. This could impact global tech companies and platforms offering digital services to Pakistani users without having a physical presence in the country.
Officials at the Federal Board of Revenue (FBR) said this reform aims to align Pakistan’s taxation regime with global best practices, where digitally delivered services are increasingly being brought under regulation. As businesses increasingly rely on technology-driven services, especially post-COVID, tax authorities globally are recognizing the need to redefine tax structures to capture cross-border digital activity.
The move is expected to expand the tax base and ensure that digitally driven economic activity contributes fairly to national revenue, while also offering a clear regulatory pathway for digital service providers operating in Pakistan.