Pakistan's Federal Board of Revenue (FBR) has officially informed Google that it is exempt from the recently introduced 5% digital tax under the Digital Presence Proceeds Act 2025.
In correspondence with Kyle Gardner, Google's South Asia government affairs representative, the FBR clarified that the law applies solely to companies operating without a registered office in Pakistan. Google’s branch presence in the country qualifies it as a tax resident, shielding it from the new levy.
This exemption has ignited public debate about whether the legislation—enacted last month to increase tax collection from digitally active foreign firms—is being effectively implemented. The law specifically targets companies offering automated digital services without any physical or registered footprint in Pakistan.
Despite being the largest contributor to Pakistan’s digital services tax, Google previously faced a 10% withholding tax under Section 152 of the Income Tax Ordinance—later increased to 15%. The latest development signals that Google could now pay as little as 5%, depending on how its operations are structured.
Officials emphasized that the exemption applies only to locally managed operations, and that digital services taxed under Section 152 cannot be taxed again under the new act. Furthermore, if Google shifts its branch to a Special Technology Zone (STZ), it could receive full income tax exemption until 2035 under Clause 123EA of the Second Schedule.
While the Digital Presence Proceeds Act was intended to cover services like streaming, cloud computing, software delivery, and e-learning, the carve-out for Google has raised concerns about whether the law’s scope and impact were properly assessed before its passage.