The Finance Bill 2026 proposes a new withholding tax framework for digital earnings by introducing Section 154B into the Income Tax Ordinance, 2001.
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Under the proposed law, banking and non-banking financial institutions would deduct tax when they credit or receive payments linked to social media income.
The proposed rules would apply to digital content creators and social media influencers earning through monetisation on platforms such as YouTube, Facebook, Instagram, TikTok and similar digital services.
New Withholding Tax Structure
The proposal broadly defines payment to include inward remittances, transfers and credits received through banking channels.
It also covers payments processed through intermediaries, including digital payment providers and online financial platforms.
As a result, authorities aim to bring digital monetisation income under the withholding tax system regardless of how creators receive payments.
Different Treatment for Residents and Non-Residents
The proposed framework introduces separate tax treatment based on residency status.
For resident taxpayers, authorities would treat the deducted amount as minimum tax.
For non-residents without a permanent establishment in Pakistan, the deducted amount would serve as final tax liability.
The proposed withholding tax rate under Section 154B stands at 5 percent for resident individuals listed on the Active Taxpayers’ List.
Similarly, non-resident persons would also face a 5 percent withholding tax rate.
The bill further states that tax collected from non-residents would qualify as final tax.
FBR Implementation Framework
The Federal Board of Revenue would issue implementation rules through official notifications.
These rules may include identification procedures, compliance requirements and reporting mechanisms.
Earlier, the FBR introduced draft amendments through SRO 545(I)/2026 and SRO 546(I)/2026.
Those proposals outlined a revenue calculation model based on Revenue per Mille and set thresholds for subscriber counts and continuous digital engagement.
The proposed measures form part of broader efforts to expand Pakistan’s tax base and regulate income generated through digital platforms.
