The Federal Board of Revenue (FBR) has said the digital proceeds tax on digitally ordered goods and services supplied from outside Pakistan will no longer apply with retrospective effect from July 1.

Last month, the government introduced new taxes on local and foreign e-commerce marketplaces, which made online shopping costlier for Pakistani customers. The government has also introduced new taxes on goods purchased online from outside Pakistan through the Digital Presence Proceeds Tax Act, 2025.

A notification issued by the FBR on Wednesday, and seen by Dawn.com, said: “The Digital Presence Proceed Tax shall not apply to digitally ordered goods and services supplied from outside Pakistan, by any person, which are chargeable to tax under the said act.”

In a post on X, Information Technology Minister Shaza Fatima Khawaja said: “We have removed the tax imposed on international companies doing e-commerce in Pakistan! Pakistan is open for business!”

Pakistan and the US finalised a trade deal on Wednesday night, expected to lower tariffs — although no figure was announced.

The Digital Presence Proceeds Tax Act, 2025, had targeted online marketplaces that sell to Pakistani customers but have little to no physical presence in the country.

Under section 3 of the proposed law, every foreign vendor with a “significant digital presence in Pakistan” would have been charged a tax on goods sold online from outside Pakistan.

Typically, these vendors include online marketplaces such as AliExpress, Temu, and Amazon, among others.

Under the proposed law, customers would have been charged five per cent of the amount paid to the vendor for the purchase of goods from a foreign marketplace.

The tax would have been collected by banks, financial institutions, or payment gateways that facilitate transactions between customers and the online marketplace.

Customs were empowered to ensure that goods purchased online from foreign marketplaces were not delivered to customers unless the courier companies provided evidence of tax payment.

In an open letter to Aurangzeb on June 25, the US Chamber of Commerce’s US-Pakistan Business Council (USPBC) had expressed “deep concerns” with the new tax measure, saying it was a “discriminatory new tax” and should be withdrawn.

“We are concerned about the Act’s conflicts with international tax norms and the risk that it will discourage foreign investment in Pakistan,” it said.

“The proposed tax would be similar to digital services taxes (DSTs) in France and the United Kingdom, which the United States Trade Representative has found to be discriminatory against US companies, inconsistent with established principles of international taxing jurisdiction, and burdensome on US commerce.

“Recent experience demonstrates that such taxes are most likely to be borne by Pakistani consumers, who will face higher costs for goods and services. Furthermore, imposing such a tax could stifle expansion and job creation among local Pakistani companies that rely on digital tools supplied by foreign companies.”

The USPBC had said it was committed to working with Pakistan on policies that support economic growth and job creation.

“To maintain the certainty and stability necessary to support continued business investment in Pakistan, we respectfully urge policymakers to withdraw the Digital Presence Proceeds Tax Act, 2025. The act would not only disproportionately harm US companies and American digital exports but also undermine the robust US-Pakistan trading relationship at a critical juncture,” the council had said.