FBR invited objections to its proposed social-media tax regime in April. The final September rules retain its central structure: deemed remuneration based on views, a 30% ceiling on expenses and a parallel withholding regime on gross banking receipts.
When the Federal Board of Revenue (FBR) published draft rules for taxing social-media creators on April 1, 2026, an earlier critique described the proposal under a simple title: “FBR: Taxing Views, Not Income!” The concern was not that digital income should escape taxation. Income earned through YouTube, Facebook, Instagram, TikTok and similar platforms is no less taxable merely because technology has changed the way it is earned. The issue was how that income was to be determined.
Nearly six months later, the drafts have become law. On September 23, 2026, FBR issued SRO 1640(I)/2026, SRO 1641(I)/2026 and SRO 1642(I)/2026. The first specifies the sector for the special procedure under section 99C of the Income Tax Ordinance, 2001. SRO 1641 deals with resident persons; SRO 1642 deals with qualifying non-residents earning Pakistan-source income through interaction with users in Pakistan.
The finalisation now permits a straightforward question: what changed after public consultation?
The architecture survived
Some drafting changed. The basic philosophy did not. Under SRO 1641, the “minimum income” of a resident creator is remuneration minus expenses, but expenses cannot exceed 30% of total revenue. Remuneration is, in turn, the higher of actual remuneration received in cash or kind and an amount calculated through Revenue per Mille (RPM). For YouTube, FBR has fixed RPM at Rs195 per 1,000 views.
The same essential structure appears in SRO 1642 for non-residents falling within its scope. That is substantially what worried critics in April. The draft SRO 546(I)/2026 had also prescribed Rs195 as RPM, restricted expenses to 30% and sought to determine minimum income through views rather than documented receipts.
The objection was therefore never to documentation of digital income. It was to substituting an administratively assumed income for income actually earned.
RPM is an outcome, not a universal price
The problem becomes clearer by looking at YouTube’s own explanation of RPM. RPM measures revenue earned per 1,000 views after YouTube’s share and may include several revenue sources. Crucially, all views are not necessarily monetised and revenue varies with geography, advertising demand, audience characteristics and content.
FBR has reversed that relationship. Instead of using actual revenue to discover RPM, it prescribes an RPM to discover revenue.
A million views of one channel need not earn what a million views of another channel earn. Audience location matters. Advertising demand matters. Subject matter matters. Monetisation eligibility matters. The proportion of views on which advertising is actually served matters. Two videos on the same channel can produce very different revenue.
The final rule nevertheless begins with a statutory figure of Rs195 for every 1,000 YouTube views and takes whichever is higher: that amount or actual remuneration. If the creator says actual remuneration is lower, the rules place the burden on that person to produce evidence to the satisfaction of the Commissioner.
This creates a curious tax principle. If actual receipts exceed the formula, actual receipts prevail. If the formula exceeds actual receipts, the formula prevails unless the taxpayer succeeds in persuading the Commissioner otherwise. The presumption therefore operates only in one direction—towards the higher figure.
The 30% expense ceiling
There is an equally serious issue about expenditure. The normal business-income principle under the Income Tax Ordinance is that expenditure incurred wholly and exclusively for business is deductible, subject to statutory limitations. The new rules instead cap expenses, for purposes of this special procedure, at 30% of revenue.
That distinction can be substantial for a serious content business. Cameras, computers, editing, animation, researchers, writers, production teams, studio facilities, software, travel and marketing do not disappear because the business distributes its product digitally. Some creators operate alone from a mobile phone; others run organisations employing many people. A uniform expense ceiling treats very different businesses as though their cost structures were identical.
It can also penalise precisely the activity Pakistan says it wants: reinvestment. A creator who hires editors, researchers, camera operators or designers may have genuine costs well above 30%. If those documented expenses cease to reduce the prescribed minimum income, the tax system can discourage formal employment and higher-quality production.
Can rules create income?
The legal question is therefore larger than whether Rs195 is a reasonable RPM or 30% a reasonable expense ratio. It is whether such substantive rules of income computation can validly be created through delegated legislation under section 99C.
Section 99C authorises a special procedure for specified sectors. The important question is whether that authority extends to creating a deemed minimum income, prescribing remuneration that may never have been received, and restricting deductions otherwise governed by the Ordinance.
This must also be read with Article 77 of the Constitution, which provides that no federal tax shall be levied except by or under the authority of an Act of Parliament. The words “under the authority” permit delegated legislation, but only within the authority Parliament has actually conferred.
The Supreme Court has already drawn the line
A recent Supreme Court judgment makes the issue particularly relevant. In Coca Cola Pakistan Ltd v Commissioner Inland Revenue, 2025 SCP 419, decided on November 12, 2025, the Court considered the relationship between section 67 of the Ordinance and Rule 13 of the Income Tax Rules. It held that subordinate legislation must operate consistently with the parent statute and cannot override, restrict or negate the principle laid down by primary legislation.
The analogy is difficult to overlook. Here too, a formula contained in the Rules seeks to determine income and restrict expenses. Whether section 99C supplies sufficient authority for that result may ultimately matter far more than the arithmetic of Rs195.
Users in Pakistan—or total views?
SRO 1641 says the special procedure applies to a resident deriving income from interaction “with users in Pakistan” through social-media platforms. SRO 1642 similarly links the non-resident regime to interaction with users in Pakistan and Pakistan-source income; for non-residents, it additionally prescribes a threshold exceeding 50,000 users during a tax year or 12,250 during a quarter.
The computational provision, however, refers to RPM multiplied by the “total number of views” divided by 1,000. Total views where—Pakistan or worldwide?
Consider a Pakistani YouTuber with two million annual views, of which only 200,000 come from users in Pakistan. The scope provision points towards Pakistani users; the computational provision, read literally, points towards total views. The difference can alter deemed remuneration tenfold. The rules do not clearly reconcile the two expressions.
There is another anomaly. “Revenue per mille” is specifically defined by reference to video shared on YouTube, while “social media platform” is defined broadly enough to cover many other platforms. What RPM is to be used for TikTok, Instagram, Facebook or a future platform operating under an entirely different remuneration model? The rules create a broad taxable universe but provide their deemed-revenue metric for one platform.
Then comes section 154B
The Finance Act, 2026 introduced section 154B. It requires banking and non-banking financial institutions to deduct tax when revenue from social-media platforms is credited or received through the banking system, including through digital payment intermediaries.
According to FBR’s updated rate card, the withholding rate is 5% for a resident person appearing on the Active Taxpayers’ List and 10% for a person outside it. For a resident, the deduction is treated as minimum tax. Business Recorder also reported the updated 5%/10% rates.
Pakistan therefore now has two distinct “minimum” concepts operating around the same activity: a minimum tax collected from gross banking receipts under section 154B, and a “minimum income” calculated under the newly notified rules by taking deemed or actual remuneration—whichever is higher—and allowing expenses only up to 30%.
They are not necessarily two separate taxes on the same amount. But their interaction requires clarity. A creator receiving foreign platform income through a Pakistani bank first encounters withholding on the gross receipt. The creator must then determine minimum income under the special formula, pay quarterly advance tax under section 147 and declare that income in the specially prescribed part of the return.
Do not make formal banking the penalty point
For Pakistan, the economic issue should be as important as the legal one. The country needs documented foreign-exchange inflows. Social-media creators, freelancers and other digital earners bring income into Pakistan from global markets without requiring imported raw materials on anything like the scale of traditional industries.
If the banking channel itself becomes the point at which gross-receipt tax is automatically collected, while the underlying income is separately subjected to a deemed-income formula, policymakers should at least examine the behavioural response. Some creators may retain more money abroad, structure payments differently or relocate parts of their business. None of that necessarily removes their legal tax liability. It can, however, affect the amount and timing of foreign exchange entering Pakistan through formal channels.
A tax regime should not unintentionally reward avoidance of the very banking trail that makes income transparent.
The non-resident dimension
SRO 1642 adds another layer by applying a special procedure to qualifying non-residents where income from interaction with users in Pakistan constitutes Pakistan-source income. That may be relevant to foreign influencers and creators with sizeable Pakistani audiences.
Domestic source rules, however, do not operate in a vacuum. Where an applicable double taxation treaty grants taxing rights differently, treaty obligations must also be considered. A notification cannot enlarge Pakistan’s taxing jurisdiction beyond the Ordinance read with an applicable treaty.
Tax income, not attention
The April draft gave FBR an opportunity to confront these problems before finalisation. The final rules refine the drafting but retain the essential structure that attracted criticism in the first place.
The real issue is not whether social-media creators should pay tax. Like every other taxpayer, they are subject to the law on income chargeable in Pakistan. Nor is digital income entitled to secrecy merely because it originates on a server abroad.
The harder question is where documentation ends and artificial income begins.
Views are measurable. Income is taxable. They are not the same thing.
A tax system that treats the first as a proxy for the second must have clear parliamentary authority, a rational connection with economic reality and safeguards against taxing income that was never earned. After SROs 1640, 1641 and 1642, those are no longer questions about a draft.
They are questions about the law now in force.