The federal government has reduced the withholding tax on international debit and credit card transactions from 5 percent to just 0.5 percent as part of the Federal Budget 2026‑27 a 90 percent cut that significantly lowers the cost of cross‑border digital payments.
Previously, banking companies collecting tax on remittances made outside the country through credit, debit, or prepaid cards were subject to notably higher rates, which many consumers and freelancers argued made international transactions unnecessarily expensive and discouraged the use of formal banking channels.
The reduction is expected to benefit a wide range of users from freelancers and remote workers purchasing software subscriptions and tools, to businesses paying for international services and platforms.
It also aligns with the government’s broader push to promote digital payments and reduce reliance on cash and informal transfer methods.
The move comes alongside the extension of the IT sector’s income tax exemption to June 2029, signalling a consistent policy direction aimed at strengthening Pakistan’s digital economy heading into the new fiscal year.
