NA body endorses 5% tax on social media earnings as FBR says up to Rs10bn digital income remains largely untaxed

The National Assembly Standing Committee on Finance and Revenue, chaired by Syed Naveed Qamar, on Thursday endorsed a proposal to impose 5% withholding tax on income earned through social media platforms.

The committee approved the proposal as part of tax measures included in the Finance Bill 2026.

Federal Board of Revenue officials told the committee that earnings from digital platforms, including YouTube, were rising rapidly and largely remained outside the tax net. They said income generated through social media activities in Pakistan was estimated at Rs4 billion to Rs10 billion.

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The Finance Bill 2026 has proposed a new tax regime for digital content creators through Section 154B, separating income from global social media platforms from the concessionary framework available to IT and software exporters.

Under the proposed provision, banks and non-bank financial institutions will be required to deduct 5% withholding tax on inward remittances or credits received from platforms such as YouTube, Facebook, Instagram and TikTok. 

For resident creators on the Active Taxpayers List, the deduction will be treated as minimum tax, while for non-residents, it will be treated as final tax.

Resident creators will still be required to calculate their annual tax liability under the normal tax regime after deducting legitimate business expenses. If their actual liability exceeds the 5% already deducted, they will pay the difference. 

However, if their calculated liability is lower than the deducted amount, the 5% deduction will remain payable as minimum tax and cannot be refunded, adjusted or carried forward.

The change means social media earnings will no longer benefit from the reduced 0.25% final tax regime extended for IT and software exporters until the tax year 2029.