PESHAWAR: The Government of Khyber Pakhtunkhwa (KP) has introduced a 5% sales tax on cryptocurrency and digital asset trading services, marking a significant step towards bringing the province’s rapidly growing virtual asset ecosystem into the tax net.
The measure has been introduced through the Khyber Pakhtunkhwa Finance Act, 2026, which inserts a new taxable service under Serial No. 45 of Part II of the Second Schedule to the Khyber Pakhtunkhwa Sales Tax on Services Act.
Under the new provision, services provided through any digital, electronic or online platform, exchange, application or interface that enables, facilitates, intermediates or executes the buying, selling, exchange, forecasting, transfer or trading of virtual assets and other financial instruments will be subject to sales tax at the rate of 5% without input tax adjustment.
Broad range of digital trading services covered
The amendment applies to services involving transactions between two or more persons relating to:
• Virtual assets
• Digital assets
• Financial instruments
• Commodities
• Securities
• Derivatives
• Other tradable instruments
The taxable consideration includes fees, commissions, spreads, mark-ups and any other similar charges collected by service providers for facilitating these transactions.
Cryptocurrency exchanges and wallet providers included
The Finance Act further clarifies that the terms “virtual asset” and “virtual asset services” will carry the meanings assigned under the Virtual Assets Act, 2026, or as defined by the relevant management committee.
The legislation also states that the taxability of these services will be determined by their economic substance and functional nature, irrespective of their nomenclature, legal form or designation.
As a result, the new tax regime extends to a wide range of digital asset service providers, including:
• Cryptocurrency exchanges
• Digital asset brokers
• Wallet service providers
• Custodial platforms
• Other intermediaries facilitating virtual asset transactions
Major policy shift towards digital economy taxation
The introduction of the reduced 5% sales tax represents a significant policy shift by the Khyber Pakhtunkhwa government towards formalising the taxation of the digital economy.
By adopting broad legislative language, the province aims to capture a wide spectrum of intermediaries operating in cryptocurrency and digital trading markets while applying a lower tax rate than the standard provincial sales tax on services.
Tax experts believe the measure reflects the government’s recognition of the growing role of virtual assets in Pakistan’s digital economy and its intention to establish a formal taxation framework for cryptocurrency-related services. They also expect the move to encourage greater regulatory compliance and improve documentation within the emerging digital asset sector while expanding the provincial tax base.
