E-Commerce Companies Will Now Be Taxed at 0.5%

Ever since the arrival of 3G/4G in Pakistan, the local e-commerce industry has really blossomed and reached new heights. Recent times have seen strong growth in the sector, especially in terms of overall sales and number of customers.

The growth and potential of the e-commerce sector in Pakistan has influenced traditional industries to also benefit from the trend. Most of these commercial entities have either gone online as well or partnered with online stores to boost their sales.

Although this may sound like a bold statement for Pakistan’s still nascent e-commerce sector, experts believe that the country will generate $1 billion in revenues from it by 2020.

A Step Back

However, the e-commerce industry is now facing a troubling situation as a 0.5 percent tax has been imposed on any businesses done through online trading by the Federal Board of Revenue.

An Income Tax Circular was issued earlier this month where a new tax on concessionary basis has been imposed. 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.

In simpler terms, any person or organization running an online marketplace will now be subject to concessionary rate of a minimum tax under section 113.

The tax will be applicable from 1st July, 2017.

Zarar looks after Sports & Auto at ProPakistani. Drop him an email: [email protected]