The Federal Board of Revenue has suspended the 5 percent Digital Presence Proceeds Tax on foreign online sellers supplying digital goods and services into Pakistan. The suspension, which took effect from July 1, 2025, aligns with broader government efforts to facilitate a trade agreement currently being negotiated with the United States.
According to a formal notification issued by FBR, the tax under the Digital Presence Proceeds Tax Act, 2025, will not apply to any person outside Pakistan supplying digitally ordered goods and services that are otherwise chargeable under the said Act. The directive, effective from the first day of the fiscal year 2025–26, removes a key tax that had impacted cross-border e-commerce platforms and digital service providers.
The decision to pause the tax collection is tied to high-level negotiations taking place in Washington, where Finance Minister Muhammad Aurangzeb, along with senior government officials, is working to finalize terms of a trade agreement with U.S. counterparts. This agreement is being positioned as a major policy milestone that could help boost Pakistan’s export competitiveness by several billion dollars, potentially improving the country’s trade balance and offering it a relative edge over regional economies like India, Bangladesh, and Vietnam.
The 5 percent tax had been introduced as part of the new Digital Presence Proceeds Tax Act earlier this year, targeting foreign digital companies operating in Pakistan’s online space. Its scope covered companies selling goods through online marketplaces, digital service platforms, and other cross-border digital business models. However, concerns were raised by stakeholders regarding the timing and potential trade implications of the measure, especially given the fragile state of Pakistan’s export and investment landscape.
With the suspension now in effect, foreign online marketplaces and platforms will be exempt from this specific tax burden, making it more feasible for them to continue or expand operations in Pakistan without immediate fiscal constraints. While the broader digital taxation structure remains in place, this particular rollback is viewed as a temporary and strategic adjustment to support diplomatic and trade objectives.
The move may also encourage a more investor-friendly environment for international digital firms seeking to engage with Pakistani consumers. As the government advances trade discussions and evaluates longer-term tax policy reforms, regulatory authorities will likely continue to adjust frameworks to align with global economic goals and bilateral trade interests.
The notification further clarifies that only those foreign entities supplying digitally ordered goods and services and previously chargeable under the Digital Presence Proceeds Tax will be exempt as of July 1, 2025. Other tax obligations applicable to digital transactions, such as sales tax, remain in force under the existing tax regime.
