The Federal Board of Revenue (FBR) will ensure a 5% withholding tax deduction from revenues that digital content creators and social media influencers receive through banking channels.
The measure took effect on July 1, 2026, and applies to income received from social media platforms. Banks and non-banking financial institutions must deduct the tax when they credit or receive a qualifying payment in a person’s account.
An income tax circular issued by the FBR on Tuesday explained the measure, which forms part of the changes introduced through the Finance Act, 2026.
Banks Responsible for Tax Deduction
The Finance Act inserted Section 154B into the Income Tax Ordinance, 2001. It requires every banking and non-banking financial institution to deduct tax when processing revenue received from social media platforms.
Division IIIAB of Part III of the First Schedule sets the withholding tax rate at 5%.
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The law defines a “digital content creator” or “social media influencer” as an individual or entity earning income from creating, publishing or monetising content on digital platforms.
The definition specifically covers YouTube, Facebook, Instagram and TikTok. Its wording also allows the FBR to bring similar platforms within the tax regime.
The provision has broad implications for Pakistani YouTubers, vloggers, streamers, publishers and other online creators who receive platform-generated revenue through local accounts.
Remittances and Digital Payments Covered
Section 154B also defines the type of “payment” subject to the deduction. It includes inward remittances, transfers and credits received through banking channels.
Payments routed through intermediaries are also covered. These may include online payment service providers and digital financial platforms used to transfer creators’ overseas earnings into Pakistan.
Under the mechanism, the financial institution processes the deduction when the money reaches the recipient’s account. Creators will therefore receive the remaining amount after the institution withholds the applicable tax.
The provision focuses on revenue that can be identified as coming from social media platforms. The FBR may issue further rules through an official Gazette notification to govern identification, reporting and implementation.
The official FBR withholding tax rate card also lists a 5% rate under Section 154B for revenues received by digital content creators and social media influencers.
Different Treatment for Residents and Non-Residents
The legal status of the deduction depends on whether the recipient is a resident or non-resident taxpayer.
For a resident person, the amount deducted constitutes minimum tax. This means the 5% deduction establishes the minimum tax treatment for income covered by the provision.
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For a non-resident person without a permanent establishment in Pakistan, the deduction constitutes final tax. Such a recipient generally faces no further Pakistani tax liability on that particular income after the deduction.
A consequential amendment to Section 169 supports this final-tax treatment for qualifying non-residents.
The separate 5% regime distinguishes social media platform revenue from certain IT and IT-enabled service exports. The Finance Act, 2026 extended the reduced 0.25% rate for eligible Pakistan Software Export Board-registered exporters through tax year 2029.
