Decoding Pakistan’s Tax Shift on eCommerce, Digital Services, and Online Advertising

Question: Is there any new tax to ecommerce in Pakistan?
Answer: No, there is not direct additional tax on ecommerce as per new budget of 2025-26 of Pakistan.

Question: What is 18% tax on ecommerce?
Answer: Brands are already giving 18% GST. So there will be no impact on them. However since couriers will be collecting these on COD transactions, so now all those who were not paying earliar will be bound to be charges 18% tax which couriers will deduct before paying the final disbursements.

Question: What is advance income tax and how it will be calculated? Isnt it additional tax?
Answer: The advance income tax is upto 3% and it will be adjusted in the final annual filling of brand/merchant or seller. The amount of AIT depends upon nature of product and average order value. Details are given below.

Question: Is the AIT being bear by the customer or by seller?
Answer: It is bear by Merchants/Seller or Brand who is selling.

Question: Is government preferring COD transactions?
Answer: No in actual calculation of by product nature, digital payments are preferred and have lower taxations.

Question: Online marketplaces like daraz will have filler merchants mandatory?
Answer: Yes market places will have strict scrutiny now and have to share data and deduct taxes on behalf of merchants.

Question: What are the details of 5% advertiser tax on fb, google tiktok?
Answer: Government has places 5% Advance tax on the digital platforms. Now Banks and Media buyers will collect these on behalf of these platforms and indirectly its being charged to customers. These are in addition to provincial government taxes which are 16% and 15% already as per Punjab and Sindh respectively.

Question: Will there be a pressure and extra load on couriers for tax calculation and timely filling?
Answer: Yes couriers will now have to pay extra attention and file as per category and nature of products by merchants.

Question: What are new ⁠Taxes on Online earning e-classes YouTube etc?
Answer: 5% additional taxes applicable now. Banks will deduct these in advance.

Question: Product nature isn't described in consignment when dispatching. So that adds a data point for the vendor to add. 
Answer: Yes either brands now will provide this information or couriers can now categories the merchants as per their nature of business and product line.

Question: Also how does a small business operating on Facebook work if they engage with bykea to deliver something for cash. 
Answer: In this case, bykea needs to hold 18% and upto 3%. But since its used in local transactions more, there is a chance of getting the taxes missed as in the case of self delivery.

Question: What happens if I ask a bykea rider to buy me something from a market.
Answer: In this case you are using online delivery services, bykea can charge you 5% for digital services. Here we believe Bykea can charge VAT already as in case of Foodpanda so no need for extra charges.

Question: Will courier deduct in advance 18% or brands will do ?
Answer: Courier can deduct from those who are not active tax payer merchants and local small merchants but for brands, they can deduct without courier involvement. Because its not made mandatory to deduct 18% by merchants in advance other than 2%.

Question: Courier deduct and hold Advance income tax and Sales Tax?
Answer: As per Finance Bill 2025-26, Courrier needs to hold 2% from sales tax in advance and upto 3% on advance income tax. Reference are in Page 52 – Eleventh Schedule, Sr. No. 8 and Page 90, 93 and on – Clause (46) in Section 153.

You can download the document from by clicking here: Finance Bill 2025-26

Video Explanation for New Taxes on Ecommerce in Pakistan:

Introduction

The Federal Budget 2025–26, as laid before the National Assembly by the Government of Pakistan, outlines significant changes to the taxation framework for Pakistan’s digital economy. Among the most notable updates are the introduction and expansion of withholding taxes on eCommerce transactions, digital services, and online advertisements. These changes aim to formalize and tax the rapidly growing digital sector and to ensure revenue collection from previously under-regulated areas.

Taxation on eCommerce Transactions, Advance Income Tax on Ecommerce Orders:

A major shift in the taxation of eCommerce comes in the form of Advance Income Tax (AIT) on payments for goods and services purchased via online platforms or delivered through cash-on-delivery (COD).

According to the document, the AIT on such transactions is now structured as follows:

• 0.25% AIT on payments below PKR 10,000 made via online (digital) methods.
• 0.50% AIT on payments below PKR 10,000 made via COD.
• 1.00% AIT on payments above PKR 10,000 made via online methods.
• 0.25% AIT on payments above PKR 10,000 made via COD.

These taxes are to be withheld by courier services or payment intermediaries and deposited with the Federal Board of Revenue (FBR). The aim is to document and regulate the expanding COD-based trade while encouraging digital payments.

Tax on Foreign Remittances for Digital Services & Freelancing:

Another key area addressed in the 2025–26 budget is foreign remittances received for freelancing, IT services, and eCommerce exports.

The official policy now imposes the following withholding tax on foreign-sourced digital income:
- 1% AIT for filers.
- 2% AIT for non-filers.

This tax is applicable to digital exporters receiving income through channels such as Payoneer, Wise, or direct bank transfers from international clients. Banks and payment processors are required to deduct this tax at the time of remittance credit.

5% Tax on Digital Advertisements and Services Like Meta, Google, Tiktok, Netflix, Shopify Etc:

One of the most critical new inclusions in the budget is the imposition of a 5% withholding tax on digital services and advertisements.

This tax applies to:
- Digital advertising platforms such as Google Ads, Meta (Facebook/Instagram), YouTube, etc.
- Subscription-based services such as cloud storage, SaaS platforms, digital tools, and streaming platforms.
- Payments made to both resident and non-resident service providers offering services in Pakistan.

The tax is withheld by the payer—either the advertising buyer (company/agency) or the financial intermediary (bank, payment processor)—and is to be submitted to the FBR.

Tax on YouTubers and Content Creators, YouTube Earning tax:

The budget also imposes a 5% withholding tax on income earned by YouTubers, influencers, vloggers, and freelancers. This tax applies at the point of receipt of income through banking channels from monetized platforms or international clients.

There is no income threshold mentioned for exemption, and the tax applies regardless of the income amount. The banks are responsible for deducting and submitting the tax to the authorities.

Pakistan’s Budget 2025–26 marks a decisive shift in the government’s stance on taxing the digital economy. By introducing well-defined tax rates on eCommerce, cross-border digital services, advertising spend, and content creation income, the government is signaling its intent to formalize digital trade and generate revenue from one of the fastest-growing sectors in the economy.

However, the real impact will depend on implementation, clarity in rules, and cooperation from financial intermediaries and digital platforms. Businesses must now proactively adapt their systems, pricing, and compliance workflows to accommodate these new fiscal responsibilities.