The Federal Income Board (FBR) has said that the digital income tax on the goods and services ordered digitally provided from outside Pakistan will no longer apply with retrospective effect as of July 1.
Last month, the government introduced new taxes in local and foreign electronic trade markets, which caused online purchases to be more expensive for Pakistani customers. The Government has also introduced new taxes on goods online from outside Pakistan through the Digital Presence Tax Law, 2025.
A notification issued by the FBR on Wednesday, and seen by Dawn.comHe said: “The Tax on the Digital Presence procedure will not apply to the digitally ordered goods and services from outside Pakistan, by any person, which are taxes with tax under said law.”
In a publication about X, the Minister of Information Technology, Shaza Fatima Khawaja, said: “We have eliminated the tax for international companies that make electronic commerce in Pakistan! Pakistan is open for business!”
Pakistan and the United States ended a commercial agreement on Wednesday night, which is expected to reduce tariffs, although no figure was announced.
The Digital Presence Tax Law, 2025, had addressed online markets that are sold to Pakistani clients but have little or no physical presence in the country.
According to section 3 of the proposed law, to all foreign suppliers with a “significant digital presence in Pakistan” a tax on assets sold online from outside Pakistan would have been charged.
In general, these suppliers include online markets such as Aliexpress, Temu and Amazon, among others.
According to the proposed law, customers would have charged five percent of the amount paid to the supplier for the purchase of goods of a foreign market.
The tax would have been collected by banks, financial institutions or payment catwalks that facilitate transactions between customers and online market.
Customs were empowered to ensure that goods bought online in foreign markets were not delivered to customers unless the messaging companies provide evidence of tax payment.
In an open letter to Aurengzeb on June 25, the Business Council of the United States Chamber of Commerce (USPBC) had expressed “deep concerns” with the new tax measure, saying that it was a “new discriminatory tax” and should be withdrawn.
“We are concerned about the conflicts of the law with international fiscal norms and the risk of discouraging foreign investment in Pakistan,” he said.
“The proposed tax would be similar to Digital Services Taxes (DST) in France and the United Kingdom, which the United States trade representative has found that it is discriminatory against US companies, inconsistent with the established principles of international fiscal jurisdiction and a burden on trade in the United States.
“Recent experience shows that such taxes are more likely to be assumed by Pakistani consumers, who will face greater costs for goods and services. In addition, impose such a tax could suffocate the expansion and creation of employment among local Pakistani companies that depend on digital tools provided by foreign companies.”
The USPBC had said that it was committed to working with Pakistan in policies that support economic growth and job creation.
“To maintain the certainty and stability necessary to support continuous business investment in Pakistan, we respectfully urge the policy makers to withdraw the tax law of the income from the digital presence, 2025. The law would not only disproportionately damage US companies and US digital exports, but also undermine the robust commercial relationship of the United States in a critical place.”
