FBR has decided to abolish the recently introduced 5% Digital Presence Proceeds Tax for goods and services ordered digitally from abroad.

The exemption applies retroactively from July 1, 2025, merely weeks after the tax was implemented.

Originally, the tax—introduced under the Digital Presence Proceeds Tax Act, 2025 as part of the 2025–26 finance bill—targeted foreign vendors like Amazon, Google, Netflix, and other online platforms without a physical presence in Pakistan. Any foreign entity earning more than PKR 1 million annually from Pakistani users could have been liable for the levy, which included both physical and digital goods or services (e.g., streaming, cloud services, e-learning, advertisements). The prices of products on Shein, Temu, and Aliexpress, among other online marketplaces, will likely come down again.

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The FBR issued S.R.O. 1366(I)/2025, confirming that cross-border digital transactions—whether physical products or online services—are no longer subject to the 5% tax.

As Pakistan negotiates bilateral agreements, notably with the United States, the decision to end the policy aligns with trade diplomacy and fiscal recalibration. Pakistan’s Finance Minister Muhammad Aurangzeb was in Washington during the announcement.

The rollback comes barely a month after the tax was applied, indicating rapid policy adjustment and response to business and trade concerns. It may cause revenue shortfalls running into billions of PKR. Officials are reportedly discussing ways to manage the fiscal gap without destabilizing governmental finances.

Even though the abolishment of the 5% sales tax is expected to bring the prices of these platforms down, due to the 18% sales tax, it still won’t come down to the pre-budget level.

Buyers and businesses involved in cross-border commerce can proceed without fear of sudden tax additions—at least for now.