On July 30, 2025, the Federal Board of Revenue (FBR) announced the withdrawal of the Digital Presence Proceeds Tax on goods and services ordered digitally from foreign entities, effective from July 1, 2025. The decision, formalized through S.R.O. No. 1366(I)/2025 under the Digital Presence Proceeds Tax Act, 2025, aims to foster Pakistan’s growing digital economy.

The five percent tax, initially introduced in the recent Finance Bill, was reversed following consultations with the International Monetary Fund (IMF), which raised concerns about discriminatory treatment. The move also addressed objections from the United States regarding the tax’s impact on American digital companies. Signed by Dr. Najeeb Ahmad, Member (Inland Revenue Policy) and Additional Secretary, the notification clarifies that no new exemptions were granted, but the tax was entirely withdrawn.

Key Impacts of the Decision

• Consumer and Business Relief: Pakistani users of international platforms like Google, Netflix, Amazon Web Services, or Zoom will avoid additional costs, ensuring affordability for digital services and subscriptions.
• Support for Freelancers and Startups: The exemption benefits Pakistan’s freelancers and tech entrepreneurs who rely on foreign software tools, reducing operational costs and enhancing competitiveness.
• Promoting Digital Innovation: By eliminating the tax, Pakistan signals its commitment to nurturing a vibrant digital ecosystem and fostering global collaboration.
• E-commerce and Remote Work Growth: The decision supports the rapid rise of online businesses, freelancing, and remote work, keeping Pakistan’s digital economy integrated with global markets.

This strategic reversal aligns with Pakistan’s vision to create a conducive environment for digital growth, benefiting consumers, businesses, and the broader tech landscape while maintaining international economic partnerships.