Pakistan to tax digital economy for the first time

June 12, 2025 (MLN): For the first time in Pakistan, the federal government has introduced a sweeping new tax regime targeting the digital economy, in a significant fiscal move set to reshape the country’s digital marketplace.

The new measures, part of the FY2025-26 budget, will be enforced from July 1 and bring e-commerce from online shopping and food delivery to streaming services under the tax net.

Local sellers operating through e-commerce platforms will now face a tax ranging between 0.25% and 2% on all digitally ordered goods and services.

Additionally, a 2% sales tax will be applied to every digital transaction.

Compliance has also been tightened: sellers must present valid income and sales tax registrations to conduct business online.

Foreign digital vendors have not been excluded.

Payments made to international sellers for goods and services delivered to Pakistan will now carry a 5% tax.

Moreover, foreign entities advertising on platforms that target Pakistani users must pay 5% of their gross advertising spend to the Pakistani government.

These measures are expected to hit the pockets of digital consumers, especially younger users who are most engaged in online buying and selling.

The shift toward taxation could disrupt many small-scale operations including home-based and individual-run businesses that rely heavily on online platforms for side income in an already strained economic climate.

Courier services, now tasked with tax collection responsibilities, may also struggle with implementation due to capacity constraints.

With strict penalties in place for non-compliance, stakeholders across the digital commerce chain are bracing for a potentially chaotic transition period.

While the rationale of expanding the tax base through regulation of digital commerce is understood, concerns remain high.

The government has been urged to address these challenges before pushing forward with full enforcement.

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