Pakistan Removes 5% Tax on Digital Goods and Services from Online Platforms

ISLAMABAD: Pakistan has removed the 5% tax imposed on online platforms providing digital goods and services, marking a significant step toward smoothing trade negotiations with the United States. The Federal Board of Revenue (FBR) issued a notification exempting companies like Google, Meta, Microsoft, and others from this tax, effective from July 1.
The tax relief is not limited to American tech giants; it extends to all foreign companies operating in Pakistan. This decision comes at a time when a Pakistani delegation is in the United States for trade talks. According to sources, during the first round of negotiations between Finance Minister Mohammad Aurangzeb and U.S. Secretary of Commerce Gina Raimondo, the U.S. raised concerns over the 5% tax, which was negatively impacting its major tech companies.
While the tax exemption is expected to benefit companies such as Google, Meta, Amazon, Microsoft, and Netflix, it is anticipated to result in a significant loss of revenue for Pakistan, potentially in the billions of rupees. Sources from the Ministry of Finance confirmed that U.S. officials will be engaging directly with the IMF to address concerns regarding this decision.
It’s worth noting that the tax had been levied on digital goods and services provided by companies that do not have offices in Pakistan. The tax had been introduced as part of this year’s budget, and it remains within the purview of the federal cabinet to waive it if needed.