Islamabad:
In a major admission to the United States for having a trade agreement, Pakistan on Wednesday exempted 5% tax on Wednesday, which it had introduced a month ago for foreign tech companies and online platforms on the supply of digitally ordered goods and services.
However, the tax exemption is not only specific to the US tech companies. All foreign companies will benefit from the decision taken as the need of the US administration, a senior official in the Federal Board of Revenue told Express Pakinomist.
FBR, the nation’s tax collection authority, informed Wednesday, on Wednesday, the day Finance Minister Muhammad Aurangzeb was in Washington for further bilateral trade interviews.
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“In the exercise of the powers awarded in section 15 of the digital presence proceeds, the federal government is pleased to order the digital presence proceeds do not apply to digitally ordered goods and services provided outside Pakistan, by any person issued tax under the said law,” under the FBR.
It further added that the tax will be waived with effect from the first day of July 1, 2025 – the day when the new law and the financial year 2025-26 budget became effective.
A Pakistani delegation is currently in the United States to run the outstanding issues that inhibit the bilateral trade agreement. It is the second visit of the Pakistani team in less than two weeks aimed at securing the trade agreement that can tackle the US concerns and to a greater extent protect Pakistan’s commercial interests.
The sources said that during the final round of trade negotiations held between Pakistan’s Finance Minister and US Trade Secretary, Howard Lutnick, the United States had raised the issue of the 5% tax imposed in the budget, which hurt the US tech giants.
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The disconnection will cause billions of rupees in tax loss to Pakistan. The Ministry of Finance said the US authorities can speak directly to the fund to tackle any concern from the International Monetary Fund. The United States is the largest shareholder in the IMF and has just over 16% efforts.
The government had introduced the 5% digital proceeds tax on the grounds that cross-border e-commerce from foreign suppliers remained largely indemnity in Pakistan due to tax agreement limits required a permanent establishment for income taxation.
The FBR had assessed the National Assembly’s Standing Committee on Funding that the tax base for market laws Varosion occurred as foreign companies used digital platforms to sell goods and services without physical presence.
Many countries have introduced Digital Services Taxes (DST) to regain taxation rights based on significant digital presence, especially for services, and therefore Pakistan suggested to tax both digitally delivered goods and services.
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The standing committee had also been informed that the digital advertisement for foreign suppliers, ie. Temu in the Pakistani market of platforms like Google would be taxed in consistency with Pakistani tax rights.
According to the new law, payment intermediaries – including banks and financial institutions – were obliged to charge SKAT on digital payments made to foreign suppliers who provide goods or services to Pakistan. They are also obliged to quarterly report revenue collected from international e-commerce providers.
Express Pakinomist Reported on July 19, Pakistan had assured the US Google that it will be exempt from a 5% new digital tax and that parts of the company’s income will be taxed even at two -thirds reduced rates.
The government had adopted the law on digital presence in June to improve tax collection from offshore companies that had significant digital presence but did not pay tax on their earnings.
This month, the tax authorities assured the company that “Google is not the target of the digital presence proceeds -tax law” and the legislation is designed to cover specific cases of significant digital presence where there is no physical or registered company’s presence in Pakistan.
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Google has a significant business presence in Pakistan and provides services for online advertising, search engine, cloud computing, communication and entertainment. It is also the largest contributor of payments of digital service.
Companies like Meta, Amazon, Microsoft and Netflix will also be the recipients of the tax exemption. The adoption of the Digital Presence Act had created ripples in Pakistan, especially among YouTube users.
The government had introduced the legislation on digital presence to Tax for tax-provided services provided via the Internet or electronic networks where delivery is automated and required minimal or no human intervention, including music, audio and video streaming services, cloud services, online software application services, services provided through online interpersonal interaction IE, tele-medicine Etc, online banking services, architectural design, research and consultancy reports, accounting service, accounting service in that form. of digital files or any other online facility.
