Pakistan has imposed a 2% withholding sales tax on marketplaces’ third-party sales. This came into effect on 1 September 2021 according to the Pakistani Federal Board of Revenue Ordinance No. XXII of 2021.
Pakistan backtracks on e-commerce VAT
This is a reversal of the plan earlier this year to introduce 17% VAT on e-commerce sellers. The Pakistani Federal Board of Revenue was persuaded by marketplace arguments that sellers would evade registration and tax payments.
B2B transactions online are not included. It is not yet clear how the sellers will be able to claim and report the Withholding Tax.
Global digital tax reforms
Many countries around the world are resorting to Withholding VAT or Digital Services Taxes on platforms due to the difficulties of administering VAT. DST are liable to be withdrawn as the OECD Inclusive Framework for a two-pillar reform of the global tax regime with a particular focus on digital income earned in countries where there is no permanent establishment.
VAT Calc’s global VAT and GST on digital services blog keeps a live update on how countries are imposing indirect taxes on non-resident providers and electronic marketplaces.
Asia Pacific VAT on digital services
|Comments (click for details)||Rate||Date||Threshold||Comments|
|Australia||10%||Jul 2017||AUD $75,000|
|Armenia||20%||Jan 2022||AMD 115million|
|Bangladesh||5% - 15%||Jul 2019||–||B2B and B2C|
|Bhutan||7%||Jul 2021||Nu 5million|
|Cambodia||10%||Mar 2022||KHR 250m|
|China||6%-13%||N/a||Nil||Withholding VAT; B2B and B2C|
|Indonesia||11%||Aug 2020||IDR600m or 12k customers|
|Japan||10%||Oct 2015||JPY 10 million|
|Laos||7%||Feb 2022||LAK 400m|
|Nepal||13%||Jul 2022||Rupees 2m||Also 2% DST|
|New Zealand||15%||Oct 2016||NZD 60,000|
|Pakistan||2%||Sep 2021||Nil||Marketplace Withholding VAT|
|Philippines||12%||Jul 2023 ?||P 3million|
|Singapore||7%||Jan 2020||S$ 100,000|
|South Korea||10%||Jul 2015||Nil|
|Taiwan||5%||May 2017||NTD 480,000|
|Thailand||7%||Sep 2021||1.8m Baht|