In a major relief for consumers, freelancers, and tech companies, the Federal Board of Revenue (FBR) has officially exempted all digitally ordered goods and services from foreign providers under the Digital Presence Proceeds Tax.

The decision comes as part of the government's move to reverse the 5% digital tax introduced in the recent Finance Bill, 2025.

According to the FBR’s notification (S.R.O. No. 1366(I)/2025) issued on July 30, 2025, the exemption is effective from July 1, 2025. It applies to all taxable digital supplies made by foreign entities and was authorized under Section 15 of the Digital Presence Proceeds Tax Act, 2025.

Signed by Dr. Najeeb Ahmad, Member (Inland Revenue Policy) and Additional Secretary, the notification clarifies that the government has not introduced a new exemption but has reversed a newly proposed tax.

The reversal followed concerns raised by the International Monetary Fund (IMF) regarding discriminatory taxation, especially against American digital companies. The United States had also formally objected to the new levy. In response, the government took corrective action and scrapped the tax after consulting with international stakeholders.

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The exemption under the Digital Presence Proceeds Tax is expected to boost Pakistan’s digital economy. Consumers will continue using global platforms like Google, Netflix, Amazon Web Services, Zoom, and Coursera without facing extra charges. This is particularly beneficial for the country’s thriving community of freelancers, remote workers, and tech startups who depend heavily on international software and services.

Additionally, this move demonstrates Pakistan’s openness to digital innovation and international collaboration. By removing financial barriers to foreign digital tools, the country signals strong support for entrepreneurship, e-commerce, and online education.

Officials from the Ministry of Finance clarified that this policy rollback was about maintaining fair treatment, not offering a new tax break. However, the practical impact is a sigh of relief for countless individuals and businesses navigating Pakistan’s rapidly evolving digital landscape.