Pakistan Assures Google Exemption from New 5% Digital Tax
Pakistan’s Federal Board of Revenue (FBR) has assured Google that the recently introduced 5% digital tax will not apply to the tech giant, sparking discussions about the effectiveness of the Digital Presence Proceeds Act 2025.
The FBR communicated this assurance to Google’s South Asia government affairs representative, Kyle Gardner, clarifying that the law targets foreign companies without a registered branch in Pakistan. Since Google operates through a registered branch office in the country, it is exempt from the new digital tax, which aims to tax international companies with significant digital presence but no local office.
The Digital Presence Proceeds Act, enacted in June 2025, was designed to increase tax revenue from global digital firms. However, the FBR confirmed that Google’s registered branch status qualifies it as a tax resident under Pakistani law, exempting it from the 5% tax. Payments for digital services linked to local branch offices are also excluded.
Previously, Google was taxed at a rate of 10%, recently raised to 15% under Section 152 of the Income Tax Ordinance. Under the new framework, Google could now be subject to as low as a 5% tax rate on any operations managed outside Pakistan.
To avoid double taxation, the FBR assured Google that the Digital Presence Proceeds Tax and Section 152 tax will not be applied on the same transaction.
Additionally, the government has offered Google a full income tax exemption if it relocates its branch to a Special Technology Zone (STZ). Companies operating in STZs enjoy tax exemptions until 2035, encouraging tech firms to boost local investments.
While the law intends to tax digital services such as streaming, cloud computing, software, and e-learning, critics question its impact after this exemption for Google, the largest contributor to Pakistan’s digital tax revenue.
