On 30 June 2025, the Finance Act, 2025 (Act) was introduced in the National Assembly of Pakistan. Effective 1 July 2025, the Act makes sweeping changes across Pakistan's tax landscape, impacting digital commerce, income tax, sales tax, customs and excise duties. These amendments aim to modernize tax administration, broaden the tax base and enhance compliance.

Highlights of the Finance Act, 2025

• New Digital Presence Proceeds Tax Act: Imposes a 5% tax on foreign vendors with significant digital presence in Pakistan
• Income tax reforms: Applies threshold restrictions on economic transactions, higher withholding tax on gains from debt securities and profit on debt, new tax credits for low-cost housing loans, etc.
• Sales tax overhaul: Introduces a 2% withholding regime for e-commerce transactions.
• Customs and excise: Adds new directorates, as well as revised duty rates for various goods
• Energy and climate change: Imposes new levies on petroleum products and internal combustion engine vehicles
• Appeals and dispute resolution: Revises tax appeal provisions and enhances powers for Alternative Dispute Resolution committees