ISLAMABAD: The Finance Bill 2026 introduces a major change to the taxation of digital earnings by proposing a new withholding tax regime on income from social media platforms, according to amendments laid out in Section 154B of the Income Tax Ordinance, 2001.
Under the proposed section, all banking and non-banking financial institutions must deduct tax at the time of crediting or receiving any payment derived from social media platforms.
The rules apply broadly to “digital content creators” or “social media influencers,” defined as any individual or entity earning income from content monetization on platforms including YouTube, Facebook, Instagram, TikTok and other similar digital interfaces.
The term “payment” is expansively defined to include inward remittances, transfers and credits received through banking channels, as well as payments routed through intermediaries such as online payment service providers or digital financial platforms.
The provision would bring the entire digital monetization system under the withholding tax net regardless of the mode of receipt.
A key feature of the proposal is the differential treatment between resident and non-resident persons.
For residents, the withheld tax would be treated as a minimum tax. For non-residents without a permanent establishment in Pakistan, the deduction would operate under a final tax regime.
The withholding tax rate under Section 154B is set at 5% for resident persons whose names appear on the Active Taxpayers’ List and 5% for non-resident persons.
The law specifies that tax collected from non-residents shall be treated as final tax. The Federal Board of Revenue may prescribe implementation rules, including identification and reporting mechanisms, through a notification in the official gazette.
Previously, the FBR issued draft amendments through SRO 545(I)/2026 and SRO 546(I)/2026 proposing a detailed computation framework based on Revenue per Mille, fixed at PKR 195 per 1,000 YouTube views, along with thresholds of 50,000 subscribers annually or 12,250 per quarter to determine systematic and continuous digital engagement.
