Pakistan Google Deal: No 5% Digital Tax Under New Law
Pakistan Google tax news is making headlines as the government has officially exempted Google from the newly imposed 5% digital tax. The announcement came after meetings between Google’s South Asia government representative and Pakistan’s Federal Board of Revenue (FBR).
This decision has stirred discussions among tech experts and policymakers, especially after the Digital Presence Proceeds Act 2025 was passed to generate revenue from digital giants operating in the country.
Why Google Is Exempt from the New Digital Tax
Under the Digital Presence Proceeds Act, companies offering digital services in Pakistan without a local office are required to pay a 5% tax. However, Pakistan Google operations are conducted through a registered branch office, qualifying Google as a tax resident under Pakistani law.
Because of this local presence, the FBR clarified that the 5% digital tax does not apply to Google.
Previous Tax Structure and New Benefits
Google was previously taxed under Section 152 at a rate of 10%, which later increased to 15%. But under the new clarification, Google may now pay:
Only 5% tax if services are managed from outside Pakistan
Or even qualify for full tax exemption if it moves to a Special Technology Zone (STZ)
Incentives to Operate in STZs
The Pakistan Google deal also includes a special incentive. If Google relocates its registered office to a Special Technology Zone, it can enjoy 100% income tax exemption until 2035 under Clause 123EA of the Income Tax Ordinance.
This move is designed to promote tech investment in Pakistan and align with government efforts to boost the digital economy.
Criticism of the Tax Relief Decision
While the exemption is a big win for Google Pakistan, some critics argue that it weakens the intent of the Digital Presence Proceeds Act. The law aimed to increase revenue from foreign companies, but excluding major players like Google may reduce overall effectiveness.
Other digital firms like Meta, Amazon, Netflix, and Microsoft contribute far less compared to Google, raising concerns about unequal treatment and potential loopholes.
Conclusion
The Pakistan Google tax exemption reflects the government’s efforts to attract and retain top tech companies. It also raises questions about tax fairness and how to balance foreign investment with local revenue generation.
With proper regulation and consistent policies, Pakistan can maintain its tech growth while ensuring that large digital platforms contribute their fair share to the economy.
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