Do foreign sites like Temu or AliExpress pay tax on sales to Pakistani buyers?

Local sellers often ask why they lose 1% or 2% on every order while a parcel from a foreign site seems to arrive untouched. The Finance Act, 2025 answered that with a separate law aimed at foreign vendors. What follows is that law as enacted. It is a separate Act, not part of the Income Tax Ordinance, and this corpus does not hold any later amendment, exemption notification or rules made under it.

What does the law say?

The Act. Section 12 of the Finance Act, 2025 enacts the Digital Presence Proceeds Tax Act, 2025. Section 1(2) of that Act says it comes into force at once.

Who is charged. Section 3(1) of the Act charges tax on “every foreign vendor having significant digital presence in Pakistan” on proceeds of every supply made from outside Pakistan of digitally ordered services or goods, “irrespective of whether delivered digitally or physically”. Section 3(3) attributes proceeds to Pakistani users where the transaction is carried out through a foreign online marketplace or e-store, it concerns digitally ordered services or goods, and a Pakistani user is a party. Section 3(4) treats a user as Pakistani where, among other things, payment for the order has been electronically paid from within Pakistan.

The significant digital presence test. Section 4 says a foreign vendor has significant digital presence where it supplies digitally ordered services and goods from outside Pakistan to users in Pakistan above one million rupees in a financial year, together with one of these factors:

• a user base and associated data input;
• billing or collection in local currency or with a local form of payment;
• responsibility for final delivery of goods and services to Pakistani consumers;
• responsibility for aftersales support, repairs or maintenance; or
• continued marketing and sales promotion to attract customers.

The rate. The Schedule to the Act sets 5% of the payment for services (including advertisement on social media platforms) and 5% of the payment made to the foreign provider for goods.

Collection. Section 5(1) requires every payment intermediary, including a banking company, financial institution, licensed exchange company or payment gateway, that remits the proceeds outside Pakistan to a foreign vendor to deduct the tax from the gross amount paid. Section 5(3) requires deposit before the 7th of the following month. Section 5(4) says Customs shall ensure no courier delivers a consignment without evidence that this tax has been paid. Section 7 makes an intermediary that fails to collect or deposit personally liable, with default surcharge at KIBOR plus 3% per annum.

How does it work in practice?

The Income Tax Ordinance, amended to 30 June 2026, still refers to this tax. A proviso to section 148 says the Collector of Customs shall not collect import tax where the recipient of the goods is also liable under the Digital Presence Proceeds Tax Act, 2025 and the tax has been collected by the payment intermediary. A similar proviso in section 152(1C) stops banks deducting non-resident tax where this tax has been collected. The Finance Act, 2026 held in this corpus does not mention the Act.

Compare the local position. Under section 153(2A) of the Ordinance, a payment intermediary or courier collects tax from a Pakistani seller on locally operated e-commerce platforms, at 1% for digital payments or 2% for cash on delivery.

Seller	Law	Who collects	Rate
Pakistani seller, local platform, card	Ordinance, section 153(2A)	Payment intermediary	1%
Pakistani seller, local platform, cash on delivery	Ordinance, section 153(2A)	Courier	2%
Foreign vendor with significant digital presence, goods	Digital Presence Proceeds Tax Act, 2025	Payment intermediary remitting abroad	5%

Worked example (illustrative figures)

Zara in Islamabad buys a Rs. 10,000 kitchen gadget from a foreign e-store, paying by debit card. Assume the vendor meets the section 4 test.

1. Tax under the Schedule: Rs. 10,000 x 5% = Rs. 500.
2. The payment intermediary remitting the payment abroad deducts Rs. 500 from the gross amount paid to the vendor.
3. For comparison, a Pakistani seller on a local platform receiving the same Rs. 10,000 by card has Rs. 10,000 x 1% = Rs. 100 collected under section 153(2A).

What if …?

What if the foreign vendor sells less than one million rupees a year to Pakistan? Section 4 is not met on the amount alone, so the vendor does not have significant digital presence under the Act.

What if the foreign company has a branch in Pakistan? Section 3(5) excludes goods supplied from within Pakistan where the payment is effectively connected with the vendor’s Pakistan branch, and services rendered through that branch.

What if the government exempts a country or class of goods? Section 15 of the Act lets the Federal Government exempt any country, class of goods or services, or class of persons by notification. No such notification is held in this corpus.

Common mistakes

• Assuming a named platform is taxed. The Act sets a test and names no business.
• Treating the Act as part of the Ordinance. It is a separate Act enacted by section 12 of the Finance Act, 2025.
• Assuming the text shown is current. This corpus holds the Act only as enacted and cannot confirm withdrawal, amendment or exemptions after that.

What to check in the official text

Read section 12 of the Finance Act, 2025, especially sections 3, 4, 5 and 15 of the enacted Act and its Schedule. Check the provisos to sections 148 and 152(1C) of the Income Tax Ordinance. Confirm with official FBR sources whether the Act has since been amended or any exemption notified, since those instruments are not held here.