FBR Imposes 0.5% Tax On E-Commerce Companies

In a latest development, Federal Board of Revenue (FBR) has levied a tax of 0.5% on all the e-commerce companies which are operating in Pakistan. The tax is imposed on businesses which are being operated online. The tax has quietly come into effect from 1st July 2017.

During the last week, an Income Tax Circular was issued where a new tax on concessionary basis got executed. In Income Tax Circular No. 04 of 2017 issued on Wednesday, the Finance Act, 2017 introduced the concept of an ‘online marketplace under Section 2(38B) of the Income Tax Ordinance, 2001. A statement from the circular read:

“Online marketplace under Section 2(38B) of the Income Tax Ordinance, 2001, which has been defined as an information technology platform run by an e-commerce entity over an electronic network that acts as a facilitator in transactions that occur between a buyer and a seller”

According to the aforementioned statement, any individual or an organization who is running an online store will now be liable to concessionary rate of 0.5% (minimum tax rate) under Section 113.

Also Read: Pakistan to sign the Information Technology Agreement to stimulate its IT sector

Role of e-commerce companies in Pakistan

The influx of 3G/4G in Pakistan has boosted the online trade. As a result, the e-commerce industry has also flourished and has reached new pinnacles. The awareness has helped Pakistani consumers to trade online which has essentially boosted the overall number of sales.

The growing tendency of e-commerce companies in Pakistan has made a positive impact in the market. Subsequently, the conventional industries got influenced and most of them have partnered with the online stores to enhance their sales.

Quick Read: 10 popular online shopping sites in Pakistan

According to the industry experts, Pakistan will make at least $1 billion from the e-commerce sector by year 2020. It would be too premature to predict anything as of now, however; even if the profit volume is 0.75% of the anticipated mark, it will boost Pakistan’s economy.

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