Q&A on Ecommerce and Digital Economy Taxation in Pakistan (Budget 2025–26)
Q: Is there any new tax on ecommerce in Pakistan?
A: No, the 2025–26 budget does not introduce any direct new tax specifically targeting ecommerce.
Q: What is the 18% tax on ecommerce?
A: Brands are already paying 18% GST, so this won’t impact them. However, for cash-on-delivery (COD) transactions, couriers will now be responsible for collecting this 18% from merchants who were previously not paying. This amount will be deducted before disbursement.
Q: What is Advance Income Tax (AIT), how is it calculated, and is it an additional tax?
A: AIT is an adjustable tax of up to 3%, depending on the type of product and the average order value. It will be settled during the seller’s or brand’s annual tax filing.
Q: Who bears the AIT — the customer or the seller?
A: AIT is borne by the seller, merchant, or brand — not the customer.
Q: Is the government promoting COD transactions?
A: No. The tax structure favors digital payments, which are subject to lower tax rates compared to COD.
Q: Will platforms like Daraz be required to ensure all merchants are tax filers?
A: Yes, marketplaces will now face stricter scrutiny. They must share merchant data and deduct applicable taxes on their behalf.
Q: What is the 5% tax on digital advertising (Meta, Google, TikTok)?
A: A 5% advance tax will be collected on digital ads. Media buyers and banks will withhold this tax on behalf of platforms. This is in addition to provincial sales taxes — 16% in Punjab and 15% in Sindh.
Q: Will couriers face additional responsibility for tax calculations and filings?
A: Yes, courier companies must now ensure proper categorization of merchants and products, along with accurate tax deductions and timely submissions.
Q: What are the new taxes on online earnings like e-classes and YouTube?
A: A 5% advance tax will now be deducted by banks on such online earnings.
Q: If product type isn’t mentioned in a parcel, does the seller need to include it now?
A: Yes, either the brand must provide this information or couriers can classify merchants based on their product categories.
Q: How are small businesses on Facebook affected when using Bykea for COD deliveries?
A: Bykea must withhold 18% sales tax and up to 3% AIT. However, due to informal local use, there’s a risk some taxes may not be collected, similar to self-deliveries.
Q: What if I ask a Bykea rider to purchase something from a local store?
A: This qualifies as a digital service, and Bykea may apply a 5% VAT. It’s expected this charge is already included, similar to Foodpanda’s model, so no extra fee should apply.
Q: Who deducts the 18% GST — couriers or brands?
A: Couriers will deduct it from non-filer or small merchants. For established brands, the deduction can occur independently. It’s not mandatory for brands to deduct more than the 2% AIT themselves.
Q: Do couriers deduct both Advance Income Tax and Sales Tax?
A: Yes. Under the 2025–26 Finance Bill, couriers must deduct 2% as advance sales tax and up to 3% as AIT.
Refer to: Page 52 – Eleventh Schedule, Sr. No. 8, and Page 93 onwards – Clause (46), Section 153 of the Finance Bill.
You can download the full document here: Finance Bill 2025–26
Summary of Key Tax Changes in Budget 2025–26
1. Advance Income Tax (AIT) on Ecommerce Payments:
| Payment Type | Amount | AIT Rate |
|---|---|---|
| Digital Payment (≤ PKR 10,000) | 0.25% | |
| COD Payment (≤ PKR 10,000) | 0.50% | |
| Digital Payment (> PKR 10,000) | 1.00% | |
| COD Payment (> PKR 10,000) | 0.25% |
- Collected by couriers or payment providers.
- Goal: Encourage digital payments and regulate COD trade.
2. Foreign Remittance Tax for Freelancers & Digital Exporters:
| Tax Filer Status | AIT Rate |
|---|---|
| Filer | 1% |
| Non-Filer | 2% |
- Applies to income received via Payoneer, Wise, or direct international transfers.
- Collected by banks at the time of remittance.
3. 5% Withholding Tax on Digital Advertising & Services:
Applies to:
- Google Ads, Facebook, Instagram, YouTube, TikTok, etc.
- SaaS subscriptions, cloud storage, streaming platforms.
- Collected by banks or ad buyers and submitted to FBR.
4. Tax on Content Creators (YouTube, Freelancers, Influencers):
- 5% tax on all income received via bank channels.
- No exemption threshold — tax applies regardless of amount.
- Deducted at the point of payment.
Conclusion:
The 2025–26 budget marks a major step in formalizing Pakistan’s digital economy. By enforcing taxation on ecommerce, freelancing, digital services, and content creation, the government aims to expand its tax net and ensure accountability. Businesses and freelancers must now adapt to this regulatory shift with compliant systems and proactive financial planning.