The Government of Pakistan has officially granted tax relief to Google, exempting the tech giant from the newly introduced 5% digital tax under the Digital Presence Proceeds Act 2025. This decision was confirmed by the Federal Board of Revenue (FBR) during a direct communication with Kyle Gardner, Google’s representative for South Asia.

According to FBR officials, the exemption applies because Google operates a registered branch office in Pakistan, categorizing it as a tax resident. Therefore, the 5% digital tax—targeting companies without physical presence in the country—does not apply to Google.

The move has sparked debate in policy circles. Critics argue that by offering such exemptions, the government may undermine the very purpose of the Digital Presence Proceeds Act, which aims to widen the tax net and hold foreign digital companies accountable for their revenues generated in Pakistan.

In the broader digital landscape, Google contributes more to Pakistan’s digital tax pool than other global tech giants, including Meta, Amazon, Microsoft, and Netflix. Collectively, these platforms contribute just over Rs. 1 billion annually, but Google’s share remains the largest.

Previously, Google was taxed at 10% under Section 152, recently increased to 15%. However, under the revised framework, its effective tax burden could drop to 5%, or even 0% if Google shifts its local branch to a Special Technology Zone (STZ). Companies operating in STZs are fully exempt from income tax until 2035, according to Clause 123EA of the Income Tax Ordinance.

FBR has also reassured Google that it will be protected from double taxation, emphasizing that provisions under Section 152 and the new digital tax law cannot be applied to the same transaction.