The Federal Board of Revenue (FBR) in Pakistan has announced the withdrawal of the Digital Proceeds Tax on goods and services ordered online from foreign vendors, effective retroactively from July 1, 2025. This decision reverses a policy introduced last month that imposed a 5% tax on cross-border e-commerce transactions, aiming to regulate platforms like Amazon, AliExpress, and Temu that lack a physical presence in Pakistan.
Details of Digital Proceeds Tax
The tax, part of the Digital Presence Proceeds Tax Act, 2025, had increased costs for Pakistani consumers, with banks and payment gateways tasked with collecting the levy. Customs authorities were also authorized to delay deliveries until tax payments were verified. The move sparked concerns among shoppers and digital entrepreneurs, who faced higher prices for everything from streaming subscriptions to imported electronics. Local startups, still subject to the 5% tax, expressed worries about competing with now-exempt foreign platforms.
FBR’s Decision
The FBR’s decision follows discussions around international trade agreements, with indications that the exemption could facilitate negotiations, particularly with the United States. The policy shift is expected to ease financial burdens on consumers amid rising inflation and enhance the competitiveness of businesses reliant on global e-commerce. However, it may reduce projected government revenue, previously estimated at Rs39 billion for the 2025-26 fiscal year.
What’s Next
Social media discussions on X highlight mixed sentiments. Some users praise the relief for online shoppers, while others question the fairness of exempting foreign vendors while local platforms remain taxed. The FBR has promised further clarification on what constitutes a “significant digital presence” and how compliance will be enforced moving forward.
Published in SouthAsianDesk, July 31th, 2025
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