ISLAMABAD: The Federal Board of Revenue (FBR) has notified a 5% withholding tax on revenues earned from social media platforms for Tax Year 2027, effective from July 1, 2026, under the updated Income Tax Ordinance, 2001, incorporating amendments introduced through the Finance Act, 2026.
The tax has been prescribed under Section 154B of the Income Tax Ordinance, 2001, which establishes a dedicated withholding tax regime for income earned by digital content creators and social media influencers through online platforms.
Five percent tax on social media earnings
According to the updated law, the rate of tax to be deducted under Section 154B has been fixed at 5% of the revenue received from social media platforms.
The measure is aimed at bringing income generated through digital content creation into Pakistan’s formal tax system by collecting tax at the point of payment.
Banks to deduct tax at source
Under the new provisions, every banking company and non-banking financial institution will be responsible for deducting the withholding tax whenever revenue from a social media platform is credited to or received in a person’s account.
The deduction will be made at the earlier of:
• The credit of funds into a bank account; or
• The receipt of payment through banking channels.
The law also extends to inward remittances, fund transfers and credits received through intermediaries, including online payment service providers and digital financial platforms.
Digital creators and influencers covered
The withholding tax applies to digital content creators and social media influencers who earn income from creating, publishing or monetising content on online platforms.
The provisions cover earnings received from platforms such as:
• YouTube
• TikTok
• Other similar digital platforms
The tax applies irrespective of the platform through which the content is monetised, provided the payment represents revenue generated from social media activities.
Tax treatment under Section 154B
The FBR has clarified that the withholding tax deducted under Section 154B will have different tax treatments depending on the taxpayer’s status.
For resident persons, the amount deducted will constitute minimum tax.
For non-resident persons who do not have a permanent establishment in Pakistan, the tax deducted under the section will be treated as final tax, discharging their liability in respect of that income.
FBR authorised to issue implementation rules
The amended law also empowers the FBR to issue detailed rules governing the implementation of the new withholding tax regime.
These rules may cover procedures for identifying taxable payments, reporting obligations, compliance requirements and the operational mechanism for tax deduction by banks, financial institutions and payment intermediaries.
The introduction of Section 154B forms part of the government’s broader strategy to expand Pakistan’s tax base by incorporating the rapidly growing digital economy and creator ecosystem into the formal taxation framework through tax collection at the point of payment.
