Section 236Y of the Income Tax Ordinance, 2001 isn't a general "digital tax". It is an advance income tax that your bank collects when you use a debit or credit card to pay for something outside Pakistan, whether that's an online subscription, a purchase from a foreign website, or a hotel booking abroad. The Finance Act 2026 cut the rate for payments made from 1 July 2026: it is now 0.5% for people on the Active Taxpayers List (ATL) and 1% for those who aren't, down from 5% and 10% in tax year 2026. Because it is advance tax, you can claim it back against your annual tax liability when you file your return.
What section 236Y covers
The tax applies to amounts remitted outside Pakistan through credit or debit cards. The bank that issued your card collects it at the time of the transaction and deposits it with FBR. Typical payments caught include:
- online shopping on international websites
- international subscriptions: streaming, software, cloud and other online services
- fees paid by card to foreign institutions
- travel costs such as hotel and flight bookings made on foreign portals
- payments by card to foreign service providers, for example for digital marketing tools
It is sometimes described as a "digital tax" because so many of these payments are for online services. But it isn't aimed at digital services as such: what triggers it is paying by card to someone abroad. No separate "digital withholding tax" with its own rates has been confirmed (see our withholding tax guide).
It covers card payments only. Section 236Y doesn't apply to money sent abroad by other means. Other kinds of remittance are dealt with under different provisions, if at all.
Rates: filer vs non-filer
| Your status | Advance tax on card payments abroad (from 1 July 2026) |
|---|---|
| On the Active Taxpayers List (ATL) | 0.5% of the transaction |
| Not on the ATL | 1% of the transaction |
For example, on a Rs 20,000 annual software subscription paid by card, an ATL filer has Rs 100 collected and a non-filer has Rs 200 collected. For anyone who pays foreign subscriptions or bookings regularly, that difference adds up over a year.
Rates can change in any budget. Check the current FBR withholding tax rate card if you're budgeting for large payments abroad.
Who is affected
Almost anyone in Pakistan who uses a Pakistani card for payments abroad:
- Individuals shopping online, subscribing to international services or paying for travel.
- Freelancers and IT professionals paying for foreign software licences, online courses or tools. See our freelancer and IT export tax guide.
- Businesses paying for cloud hosting, international services or foreign supplier invoices by card. See our guide to deductible business expenses for how the underlying costs are treated.
- Students and families paying fees to foreign institutions by card.
Claiming the tax back in your return
Tax collected under section 236Y is adjustable. It isn't an extra cost if you're a filer who claims it properly.
- Keep your records. Hold on to your card statements showing each payment abroad and the tax collected, and ask your bank for a certificate of the tax collected if you need one for your return.
- Claim it in the adjustable tax section of your annual return in IRIS, alongside tax deducted from your salary, bank profit and other payments. The step-by-step process is in our guide to claiming WHT credit.
- If your total adjustable tax is more than your liability for the year, the excess is refundable.
If you pay advance tax in quarterly instalments, the tax collected under section 236Y during the year also counts towards what you owe. See our advance tax guide.
The catch for non-filers is that the higher 1% rate applies at the point of payment, and getting any of it back means filing a return anyway.
How to pay the lower rate
The lower rate depends on your name being on the Active Taxpayers List:
- Register with FBR if you don't already have an NTN.
- File your annual income tax return by the due date. Filing keeps you on the ATL.
- Check your ATL status on the FBR website using your CNIC.
Our guide to checking ATL status and becoming a filer covers each step. Lower rates on card payments abroad are just one of the ways filers pay less tax at source than non-filers.
Practical tips
- Budget for it. When you're comparing prices for foreign services, add the 0.5% (or 1% if you're not a filer) on top of the card charge.
- Keep statements for the whole tax year (1 July to 30 June), so you can total the tax collected when you file.
- Business owners: keep invoices for services paid abroad by card, so the expense and the tax credit are both supported if FBR asks.
Frequently asked questions
Is section 236Y a "digital tax"?
No. It is advance income tax on amounts remitted abroad through debit or credit cards. It applies whatever you're buying, and it is adjustable against your final tax.
What are the section 236Y rates?
From 1 July 2026 (tax year 2027), 0.5% for persons on the Active Taxpayers List and 1% for persons not on it, per the Finance Act 2026. Check the current FBR rate card in case a later budget has changed them.
Can I get the tax back?
Yes. It is adjustable. Claim it in your annual return, and if your total adjustable tax is more than your liability for the year, the excess is refundable.
Does section 236Y apply to cash or bank transfers sent abroad?
No. Section 236Y applies specifically to payments through debit or credit cards. Other forms of remittance may be covered by different rules.
How do I check whether I'm on the ATL?
On the FBR website, by entering your CNIC. See our ATL guide.
This is general information and tax rules change; check FBR's current notifications or a tax adviser for your own case.