Pakistan gives tax relief to Google, sparking debate over the newly introduced Digital Presence Proceeds Act 2025, aimed at taxing foreign digital companies operating in the country.
The Federal Board of Revenue (FBR) recently assured Google’s South Asia representative, Kyle Gardner, that the tech giant will not be subject to the 5 percent digital tax introduced under the law.
This is because Google operates through a registered branch in Pakistan, which qualifies it as a local tax resident.
The law, passed in June 2025, targets international firms with a digital footprint in Pakistan but no local presence. However, Google’s local registration exempts it from the new tax, the FBR clarified.
Previously, Google was taxed at 10 percent under Section 152 of the Income Tax Ordinance. That rate was increased to 15 percent, but now, the FBR says only a 5 percent tax may apply if Google runs some services from abroad.
This move has raised questions about the effectiveness of the new digital tax law, especially as Google is the largest digital taxpayer in Pakistan, contributing more than firms like Meta, Amazon, and Netflix.
Critics argue that the Digital Presence Proceeds Act 2025 may fall short of expectations, as exemptions for companies with local branches weaken its scope.
In a major incentive, the FBR also told Google it could receive a complete income tax exemption until 2035 if it relocates operations to a Special Technology Zone (STZ) under Clause 123EA of the Income Tax Ordinance, 2001.
The law aimed to tax services like streaming, cloud computing, telemedicine, e-learning, and other automated digital services. However, the government’s reassurances to Google have sparked concerns over unequal tax treatment and policy clarity.
