ISLAMABAD: In a major move to bring Pakistan’s fast-growing digital economy under the formal tax system, Pakistan’s federal government has announced new tax rules for online sellers, freelancers, and social media influencers.
As part of the Rs17.57 trillion federal budget for 2025–26, Finance Minister Muhammad Aurangzeb revealed that e-commerce platforms will now collect 18% sales tax from sellers operating on their sites.
This tax will apply to all products and services sold through websites, apps, and marketplaces like Daraz and Foodpanda. It will be applicable from July 1st, if approved by the parliament.
“This is not just about increasing revenue. It’s about fairness and bringing the digital sector into the national economy,” the minister said.
What’s Changing?
The government is formally recognizing digital businesses and services—including online selling, freelancing, and content creation—as taxable activities.
Under the new proposed law, being enacted through the finance bill tabled before parliament on Tuesday:
- Anyone selling products or services online must register for Income Tax and Sales Tax.
- Online platforms and courier companies are barred from working with unregistered sellers.
- Fines of up to Rs1 million will be imposed on platforms that break these rules.
- A new tax (Section 6A) will apply to all digital payments made for goods or services delivered inside Pakistan.
Freelancers and Influencers Must Pay Too
For the first time, freelancers and digital content creators will be taxed. The government plans to impose a 3.5% income tax on money earned through platforms like YouTube, TikTok, and Instagram.
This move is expected to bring in Rs52.5 billion in additional revenue. The tax applies to remote workers such as designers, consultants, educators, and developers providing digital services inside Pakistan.
However, income from exports and overseas clients will remain tax-exempt under current laws.
Concerns from the Digital Community
Not everyone is happy with the changes. The Pakistan Freelancers Association (PAFLA) has warned that taxing all freelancers equally could harm the country’s growing digital workforce.
“The government should tax high-earning influencers, not educators or small freelancers,” said PAFLA Chairman Ibrahim Amin. “This blanket approach could reduce foreign income and limit opportunities for youth.”
Pakistan’s freelancers have been a major source of foreign exchange, bringing in over $400 million in IT exports annually.
What Counts as E-Commerce or Digital Service?
The new tax net now includes:
- Streaming services (music, video, audio)
- Cloud storage and software
- Online education and telemedicine
- Remote freelance services (consulting, design, research)
- Digital marketplaces and apps
- Even foreign sellers using Pakistani platforms to sell locally
If a service or product is ordered online—via website, app, or mobile—it is now considered part of e-commerce and subject to taxation.
What You Need to Do
If you work online—as a graphic designer, IT freelancer, YouTuber, or online shop owner—you will now be required to:
- Register with tax departments
- Maintain records of your digital income
- Pay taxes based on your earnings
Looking Ahead
Pakistan is following the lead of other countries that are taxing digital services, such as India and several EU nations.
However, experts say the government must ensure that these new policies do not discourage digital innovation.
