The Federal Board of Revenue (FBR) has clarified that its new Digital Presence Proceeds Tax (DPPT)will not apply to goods and services ordered online from outside Pakistan.
In a notification issued on Tuesday (S.R.O. No. 1366(I)/2025), the FBR confirmed that the exemption took effect on July 1, 2025.
The Digital Presence Proceeds Tax shall not apply to digitally ordered goods and services supplied from outside Pakistan.
-the notice stated
This move is expected to ease concerns for international e-commerce companies and reduce the chances of double taxation for foreign digital platforms that provide services to Pakistani consumers.
What Is This Tax All About?
The government introduced the DPPT Act in its 2025-26 budget. It aimed to tax foreign digital firms earning from Pakistani users. This includes companies without a local office.
The law imposes a 5% withholding tax. also called the digital transactions levy, on payments made to both domestic and international digital vendors. This applies to companies such as Amazon, Google, Facebook, Netflix, Daraz, Temu, and PakWheels.
Banks and payment companies were given the responsibility to deduct the 5% at the time of payment and send that money to the FBR. They were also to report it every quarter.
Digital Services Tax: Uneven Playing Field for Local vs. Foreign Platforms
With the FBR exempting foreign-supplied goods and services from the 5% Digital Presence Proceeds Tax, Pakistani digital businesses may now find themselves at a disadvantage. Local digital platforms and local edtech or fintech services are still subject to the 5% levy because they operate from within Pakistan or have a registered presence here. Whereas foreign platforms, even if they offer similar services, are now exempt if they supply from outside, making them 5% cheaper by default or simply more competitive.
The exemption could also discourage investment in domestic digital ventures. Startups may struggle to compete on price, especially in sectors like e-commerce, cloud storage, online education, digital banking and wallets, and subscription-based platforms. Local companies will still have to collect and submit the 5% tax, maintain quarterly reporting, and bear the cost of compliance. All of which will add to their operational load.
Over time, if local platforms face higher costs, lower margins, and tougher competition, Pakistan risks becoming a digital consumer economy, reliant on global players instead of building homegrown innovation.
The FBR says it will issue more details soon, especially on what qualifies as a “significant” digital footprint, how companies should report payments, and who exactly falls under the tax.
But the bigger question is this: if the government can offer relief to foreign platforms, why not extend similar support to local start-ups trying to grow in the same space?
For more daily updates, please visit our News Section.