Pakistan budget 2026-27: Super tax cut, IT relief and new digital levies

Pakistan's government unveiled its federal budget for fiscal year 2026-27 on Friday, announcing super tax reductions, extended IT export incentives and new levies on the digital economy.

Finance Minister Muhammad Aurangzeb presented the proposals in the National Assembly, combining targeted relief for businesses with fresh revenue measures aimed at strengthening tax collection.

What are the super tax changes in Pakistan's budget 2026-27?

The government has abolished super tax for businesses earning up to PKR500 million annually. For those earning above that threshold, the rate drops from 10% to 8%.

Banking, oil and gas exploration and production, and fertilizer companies are excluded from the relief and will continue paying super tax under existing provisions.

How does the budget support Pakistan's IT sector?

The government extended the Final Tax Regime for IT and IT-enabled services exports by three years, keeping it in place until June 2029. Registered IT exporters will continue paying a final tax rate of 0.25% on export proceeds. The extension signals continued state backing for the technology sector as a source of foreign exchange earnings.

The overall tax burden on export proceeds has also been reduced. The combined rate drops from 2%, comprising 1% withholding tax and 1% advance tax, to 1.25%. This applies broadly to exporters across sectors.

What new taxes does the budget introduce on the digital economy?

Digital content creators and social media influencers earning income through platforms such as YouTube, Facebook, Instagram and TikTok will face withholding tax under the new budget. Banks and financial institutions will deduct the applicable tax when payments are made to these individuals.

A 5% digital services tax on foreign vendors with a significant digital presence in Pakistan has also been proposed, targeting services including streaming, online advertising and cloud services.

What compliance measures does the budget introduce for manufacturers?

Manufacturers will be required to pay and recover a 3% value-added tax if imported raw materials are sold without further processing. Individuals and Associations of Persons will also be subject to withholding tax on payments to unregistered suppliers for goods purchases. Both measures are designed to improve documentation and limit misuse of tax concessions.

[H2: What other relief measures are included in the budget?]

The government proposed abolishing the Capital Value Tax on foreign movable and immovable assets held by resident Pakistanis. Withholding tax on overseas transactions through credit and debit cards has been cut sharply, from 5% to 0.5%. Electric vehicle incentives, including on completely knocked down kits for motorcycles, three-wheelers, cars and buses, have also been extended.

The energy sector received targeted support through a sales tax exemption on capital goods imports for the upgradation and overhaul of existing oil refineries. Meanwhile, petroleum-based solvents including white spirit, naphtha and mineral turpentine oil will face a Federal Excise Duty of PKR80 per liter, a measure officials say is intended to discourage their use in fuel adulteration.