Budget 2025: Key Tax Changes Every Business in Pakistan Should Understand
The Finance Bill 2025 arrives at a critical time when Pakistan’s economy is showing early signs of recovery. Backed by IMF support, cautious fiscal management, and inflation-controlling policies, the budget introduces reforms aimed at expanding the tax base, digitalizing the economy, and tightening compliance.
For businesses—especially those operating in digital commerce, real estate, and retail—several changes carry significant implications. This analysis presents the most impactful tax changes proposed in Budget 2025 and what they mean for business decision-makers.
Digital Sellers and E-Commerce Platforms Brought Into Tax Net
Pakistan's e-commerce sector, which has grown steadily despite infrastructure and documentation challenges, is now under sharper tax scrutiny.
A final tax regime (FTR) has been proposed for all domestic suppliers of digitally ordered goods and services. These include vendors operating on local online marketplaces or websites. The tax will be collected on gross receipts through both digital channels and cash-on-delivery, with rates varying by amount and product category.
What makes this significant is the expanded definition of "e-commerce," now encompassing any sales made through digital interfaces — whether mobile apps, websites, or automated ordering systems. Payment intermediaries and courier companies have been designated as withholding agents, responsible for collecting tax from vendors at source and submitting detailed statements to the tax authorities.
Failure to comply will result in penalties for both vendors and platform providers. Furthermore, online sellers are now mandated to register for both NTN and sales tax, reflecting a clear move toward full integration of digital commerce into the documented economy.
Disallowance of Expenses to Drive Documentation
To further push the shift toward traceable transactions, the Finance Bill introduces strict disallowance rules on expenses linked to undocumented parties or unverified payments.
50% of expenses will be disallowed where a business receives payment over Rs. 200,000 per invoice but not through banking or digital channels.
A 10% disallowance applies on purchases from suppliers who do not possess an NTN, unless exempted or related to direct agricultural produce.
These provisions not only incentivize digital transactions but also force businesses to restructure procurement and sales practices if they are to retain their full deductibility and cost structures.
Fair Market Value for Commercial Rental Income Introduced
Aimed at countering under-reporting of rental income, the Bill proposes that commercial property owners must report a minimum annual rent equivalent to 4% of the property’s FBR-assessed fair market value (FMV).
While actual lower rents can be justified with strong documentation, this measure will likely affect property-owning businesses and commercial landlords, especially those who previously disclosed lower rents.
Digital Payments Now a Recognized Mode for Asset Purchases
In a move toward modernization, digital transfers have now been added as an acceptable payment mode for acquiring assets. This ensures that cost and depreciation claims on such assets will be honored even if payment is made digitally instead of through traditional banking instruments.
This aligns with global best practices and encourages transparency in large capital transactions, including fixed asset acquisitions and project-based investments.
New Restrictions on Non-Filers: Transactions Now Tied to Compliance
Perhaps one of the most consequential changes in Budget 2025 is the introduction of Section 114C, which restricts a range of economic activities for individuals and entities not compliant with tax filing requirements.
Non-filers (and even late-filers) may now be barred from:
Purchasing vehicles or property over a prescribed threshold
Investing in securities or mutual funds
Opening current or savings accounts (except basic accounts)
Making large cash withdrawals from banks
To be considered "eligible," a person must either be a tax return filer with declared resources or submit a "Source of Investment and Expenditure Statement" through the FBR portal. This provision serves a dual purpose: broaden the tax base and tighten monetary transparency.
Conclusion: A Shift Toward Enforcement, Digitalization, and Broader Tax Base
The Budget 2025 framework indicates a policy pivot—away from leniency and toward documentation, traceability, and digital enforcement. Businesses that rely on informal networks, cash-based models, or unregistered vendors will face steeper compliance costs and higher tax liabilities.
For professional firms and companies that want to stay ahead, now is the time to re-evaluate supply chains, sales processes, rental declarations, and tax payment methods. The future is digital—and documented.
At Chartered Bridge, we help businesses stay tax-compliant, fully documented, and structurally optimized for the evolving fiscal landscape of Pakistan.