ISLAMABAD: The Finance Bill 2026 has proposed a significant shift in the taxation of income derived from social media platforms by introducing Section 154B of the Income Tax Ordinance, 2001, thereby bringing the revenue received from Social Media Platforms within a formal withholding tax regime.
Tax expert M Amayed Ashfaq Tola, President of Tola Associates told Business Recorder that under the proposed Section 154B, every banking and non-banking financial institution is required to deduct tax at the time of credit or receipt of any amount in respect of revenues generated from social media platforms.
The provision applies broadly to “digital content creators” or “social media influencers,” defined to include any individual or entity deriving income from monetisation of content on platforms such as YouTube, Facebook, Instagram, TikTok and other similar digital interfaces.
READ MORE: FBR to tax non-resident social media account holders
He further explained that the term “payment” has been expansively defined to include inward remittances, transfers, and credits received through banking channels, including payments routed through intermediaries such as online payment service providers or digital financial platforms. This effectively brings the entire system of digital monetisation within the withholding tax net, irrespective of the mode of receipt.
A critical feature of the proposed provision is the differential tax treatment between resident and non-resident persons. In the case of a resident person, the tax deducted is to be treated as minimum tax, whereas in the case of a non-resident person not having a permanent establishment in Pakistan, the deduction is to operate in the final tax regime.
It is provided that the rate of tax to be deducted under Section 154B shall be 5 percent in case of resident persons whose name appears on the Active Taxpayers’ List, and 5 percent in case of non-resident persons, with a proviso which states that the tax collected from non-resident persons shall be treated as final tax. The Board may prescribe by a notification in the official gazette the rules for implementation, including identification and reporting mechanisms.
However, previously FBR had issued draft amendments through SRO 545(I)/ 2026 and SRO 546(I)/ 2026 whereby a detailed computation framework was proposed based on Revenue per Mille (“RPM”), fixed at PKR 195 per 1,000 YouTube views, along with thresholds of 50,000 subscribers annually or 12,250 per quarter to determine systemic and continuous digital engagement. The said SROs sought to insert new Chapters VA and IIA into the Income Tax Rules, 2002, thereby introducing a special procedure for taxation of income from remunerative social media content for both resident and non-resident persons.
Under the proposed framework, the computation of income was to be carried out in two stages:
Firstly, the total remuneration was to be determined as the higher of (i) RPM multiplied by average views per content and total number of posts during the year, or (ii) actual receipts in cash or kind. Further, taxable income was to be computed by deducting expenses capped at 30 percent of total revenue. The rules further proposed interalia a quarterly advance tax liability, and mandatory disclosure in a special segment of the income tax return.
However, it is important to note that these SROs were issued as a draft amendment. Therefore, their status is unclear as SROs translated into permanent features of the Income Tax Rules, 2002.
Further, the previous SRO issued was based on an assumption of revenue per mille, whereas, the newly proposed Section 154B is based on revenue receipts. Considering the newly proposed withholding tax is minimum tax for residents and final tax on non-residents, the treatment of advance tax that was proposed to be submitted as per Rules 13ZL and 19O introduced vide the Draft SROs remains unclear, Tola added.
Copyright Business Recorder, 2026
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