Pakistan Targets Overseas Content Creators With 5% Tax on Earnings From Local Audiences

ISLAMABAD, Sept 25 : Pakistan’s Federal Board of Revenue (FBR) has introduced a special procedure for taxing income earned from remunerative social media content, including earnings generated through views, advertising, sponsorships and other forms of digital monetisation.

The rules apply to both resident and non-resident persons earning Pakistan-source income through interaction with users in Pakistan, subject to prescribed thresholds. The procedure was introduced through SRO 1641(I)/2026 and SRO 1642(I)/2026 under the Income Tax Ordinance, 2001.

The FBR has set the threshold at more than 50,000 users during a tax year or more than 12,250 users during a quarter. The threshold applies to what the FBR describes as systemic and continuous solicitation of business activities or engagement through digital means.

A 5% tax rate applies to income covered by the new framework, following the government's introduction of the rate in the budget.

Under the procedure, minimum income for a tax year will be calculated after deducting allowable expenses from total remuneration. Expenses can be claimed up to 30% of total revenue.

The total remuneration will be determined based on whichever is higher: the actual remuneration received from social media content or income calculated using the FBR’s prescribed revenue-per-mille (RPM) formula.

For YouTube, the FBR has prescribed an RPM of Rs195 for every 1,000 video views under the special procedure. The FBR may revise the prescribed rate from time to time.

Where a taxpayer claims that actual earnings are lower than the amount calculated using the prescribed RPM, the taxpayer must provide evidence to the relevant Commissioner to establish the lower income.

Those covered by the rules will be required to pay quarterly advance income tax under Section 147 of the Income Tax Ordinance. The income must also be declared in a designated section of the annual income tax return.

If declared income is lower than the amount calculated under the prescribed procedure, the relevant Commissioner may rectify the return and recover the outstanding amount.

The move comes as social media has become an increasingly important source of income through advertising, sponsorships, views and other forms of digital monetisation. The FBR has established the framework to bring such earnings into the tax system, including income earned by non-resident individuals through interactions with users in Pakistan.

The FBR defines a social media platform as an internet-based service that enables users to interact and share user-generated content, with economic value derived from user participation, network effects and the monetisation of engagement or user data.

Remunerative social media content covers digital content that generates remuneration in any form.

Other provisions of the Income Tax Ordinance, 2001 will continue to apply where they are not specifically addressed by the new procedure.