The federal government is set to implement the Digital Presence Proceeds Levy Act 2025, presenting a new 5% tax on global and domestic digital companies, including digital vendors in Pakistan like Amazon, Facebook, Google, Daraz, and PakWheels, that supply digitally ordered goods or services to customers in Pakistan.
As per the new Act, all banks, financial institutions, and payment gateways facilitating payments to foreign digital vendors must deduct the levy at the time of remittance. These financial negotiators will also be responsible for filing detailed quarterly reports to the Federal Board of Revenue (FBR) and halting payments to vendors who fail to comply with the law.
The Digital Presence Proceeds Levy Act 2025 requires that this tax will apply even if the foreign vendor does not have a physical presence or permanent establishment in Pakistan but maintains a “significant digital presence,” defined by annual revenues exceeding one million from Pakistani users and engaging in activities such as data collection, billing in local currency, using local logistics, offering after-sales services, or targeting marketing efforts within Pakistan.
The scope of the law covers both physical and digital goods or services sold online. Digitally delivered services include cloud computing, streaming platforms, software solutions, e-learning, digital banking, consultancy, and architectural design. E-commerce transactions, including those facilitated through online marketplaces that do not own inventory but enable sales, also fall within the levy’s reach.
The Revenue Division’s objective is to incorporate cross-border digital commerce into the local tax regime and ensure tax compliance from global digital platforms operating within Pakistan’s economy.
Vendors who fail to comply with payment or filing requirements will face a penalty of Rs1 million per infraction. Additionally, any outstanding amount will incur a surcharge of 3% above the Karachi Interbank Offered Rate (KIBOR) per annum.
Unpaid levies will be recovered in line with the Income Tax Ordinance, 2001, with remittance channels through banks potentially blocked for defaulting vendors. The law also allows companies to appeal tax collection orders to the Commissioner of Inland Revenue (Appeals) as per the current income tax framework.
However, tax authorities have not yet specified how they plan to regulate payments made via credit cards for the services covered under the Act.
Digital Vendors
Digital Vendors are businesses or individuals that sell digital products or services online, such as software, eBooks, digital marketing, web development, or cloud-based tools.
