On 10 July 2025, the Federal Board of Revenue (FBR) issued SRO 1366(I)/2025 under Section 15 of the Digital Presence Proceeds Tax Act, 2025.
This notification clarifies a crucial point: digitally ordered goods or digitally delivered services supplied from outside Pakistan—already liable to tax under the Act—shall not be subjected to additional Digital Presence Proceeds Tax (DPPT).
(Source: FBR)
This clarification has major implications for businesses, freelancers, corporate taxpayers, digital buyers, and cross-border e-commerce consumers.
What the SRO Means in Simple Terms
The Government has officially stated:
No double taxation on imported digital goods or digital services.
If a service or good originates outside Pakistan, and is:
ordered through a digital platform,
downloaded or accessed digitally,
delivered through online portals or cloud systems,
…and is already subject to tax under the DPPT Act, no additional DPPT will be recovered.
Real-World Examples to Understand SRO 1366(I)/2025
Below are clear practical scenarios showing how the exemption applies.
Example 1 — A Company Buying Software from the United States
A Karachi-based IT company purchases:
Microsoft 365
Adobe Creative Cloud
Zoom Enterprise licenses
These are downloaded digitally and billed by foreign companies.
Before SRO 1366(I)/2025:
There was ambiguity on whether additional DPPT could be charged.
After SRO 1366(I)/2025:
No DPPT will be charged again on these imported digital subscriptions.
Only the tax applicable under DPPT Act (if any) will apply.
Example 2 — Online Learning Subscription from Abroad
A student subscribes to:
Coursera Plus
Udemy
LinkedIn Learning
These are digital services supplied from outside Pakistan.
Result:
Exempt from additional DPPT. Only the underlying tax under the Act applies.
Example 3 — Digital Design Elements Purchased Online
A freelancer in Pakistan buys:
Canva Pro
Envato Elements
Shutterstock images
WordPress premium themes
Since the supplier is outside Pakistan and goods/services are delivered digitally, DPPT will not be applied twice.
Example 4 — Cloud Computing for Pakistani Startups
A tech startup uses:
AWS EC2
Google Firebase
DigitalOcean servers
All services originate abroad.
Outcome:
No duplicate DPPT. Only the tax applicable under the Act is chargeable.
Example 5 — Local Pakistani Digital Service Provider
If the service provider is in Pakistan (e.g., a local software company), the SRO does not apply.
Such suppliers remain fully liable under DPPT.
Example 6 — Digitally Ordered Physical Goods From Abroad
If the purchase is physical, not digital—such as electronics from Amazon—this SRO does not apply.
It only applies to digital goods/services.
Why This SRO Was Necessary
The introduction of the Digital Presence Proceeds Tax created uncertainty regarding whether:
imported SaaS
online platforms
foreign digital tools
cloud software
cross-border digital downloads
would face double taxation.
SRO 1366(I)/2025 eliminates this risk and aligns Pakistan’s tax framework with:
OECD digital tax principles
international e-commerce norms
cross-border digital trade standards
Legal Authority
The SRO derives its power from Section 15 of the Digital Presence Proceeds Tax Act, 2025, enabling the Federal Government to issue exemptions where required.
The notification explicitly states:
“Digitally ordered goods and digitally delivered services supplied from outside Pakistan… shall not be subjected to the Digital Presence Proceeds Tax.”
Who Benefits From the Exemption?
✔ Businesses using global digital services
Google Workspace, HubSpot, CRMs, ERP systems, HR tools, cloud computing, etc.
✔ Freelancers
Anyone using design, editing, research, automation, or video platforms.
✔ Digital creators
YouTubers, TikTokers, editors, and marketers using foreign tools.
✔ Students & Individuals
Netflix, Amazon Kindle, Adobe, VPNs, cloud storage, digital applications.
✔ E-commerce sellers
Digital inventory, templates, licensed software, etc.
Tax Filing Impact (Practical)
For businesses:
Treat imported digital services as a separate expense category.
Apply only the tax required by the DPPT Act (if applicable).
Do not apply DPPT again.
Keep invoices, email receipts, and payment confirmations.
For freelancers:
Imported software is a deductible business expense.
No duplicate tax will appear in IRIS.
Maintain digital receipts for audit.
FAQs on SRO 1366(I)/2025 (With Examples)
1. What does SRO 1366(I)/2025 state?
It exempts digitally ordered/delivered services imported from abroad from additional DPPT.
2. Does it apply to Netflix, Disney+, Spotify?
Yes — all are foreign-origin digital services.
3. Are cloud services like AWS and Google Cloud exempt?
Yes — foreign cloud providers are exempt from additional DPPT.
4. Does the SRO apply to software licenses bought online?
Yes — such digital supplies fall under the exemption.
5. What about foreign freelancers offering services to Pakistani clients?
Yes — if service is provided from outside Pakistan.
6. Is withholding tax still applicable?
Yes, if another section (e.g., Section 152) applies.
7. Does this impact local Pakistani suppliers?
No — only foreign-origin supplies are covered.
8. Does it apply to imported physical goods?
No — only digital goods/services.
9. What is the effective date?
1 July 2025.
10. Does this SRO apply automatically?
Yes — no application is required.
11. Do Pakistani e-commerce platforms get the exemption?
No — only foreign-origin supplies.
12. Are video-editing platforms included?
Yes — e.g., CapCut Pro, Adobe Premiere Pro.
13. Does the SRO impact sales tax on services?
No — this is separate and remains applicable.
14. What if a foreign company has servers in Pakistan?
If the supplier is considered foreign-origin, the exemption applies.
15. Are VPN and digital privacy tools exempt from DPPT?
Yes — these are digitally delivered foreign services.
16. Does FBR require proof that service was foreign-origin?
Invoices, subscription receipts, payment confirmations.
17. Are domain registrations covered?
Yes — if purchased from foreign providers like GoDaddy or Namecheap.
18. What about digital marketing platforms?
Yes — Facebook Ads, Google Ads, LinkedIn Ads fall under digital services from abroad.
19. Can local resellers of foreign services claim exemption?
No — the reseller is a local supplier.
20. Does this SRO reduce costs for businesses?
Yes — by avoiding double taxation.
Disclaimer
The information contained in this article is compiled for general guidance, educational reference, and public benefit. Although every effort has been made to ensure accuracy, completeness, and correctness in light of the Digital Presence Proceeds Tax Act, 2025, SRO 1366(I)/2025, and relevant tax laws of Pakistan, the material herein does not constitute legal, tax, or financial advice.
Tax laws are subject to frequent amendments, notifications, circulars, and judicial interpretations. The author and Tanweer Habib & Co. assume no liability for any loss, consequence, or damage—whether direct or consequential—arising from reliance upon the contents of this publication.
Readers are strongly advised to consult a qualified tax professional or refer to the exact statutory provisions, SROs, and FBR guidelines before making any decision or taking any action based on the information provided.
