Pakistan’s tax authority, the Federal Board of Revenue (FBR), has initiated a sweeping push to incorporate cryptocurrencies and other virtual assets into the formal tax system. After years of limited oversight, officials are now consulting with experts and industry stakeholders to craft a taxation framework for a broad range of crypto-related activities.
The scope of the task is significant. It isn’t only about taxing trading gains of coins like Bitcoin and Ethereum. FBR must also grapple with mining operations, staking rewards, yield farming, non-fungible tokens (NFTs), token issuance (ICOs/IEOs), and offshore holdings, all of which introduce novel complexities compared to traditional tax bases.
One major hurdle is that many of these activities take place outside conventional banking or financial systems. For example, mining generates rewards in crypto rather than fiat; staking and yield-farming returns are often deposited directly into digital wallets; offshore exchanges allow residents to trade anonymously, all making traditional tax monitoring difficult. Some reliable sources estimate Pakistani residents may hold offshore crypto assets exceeding US $25 billion.
How the Framework Could Look
According to FBR’s early discussions, and drawing from international best practices, the framework may include:
- Amendments to the Income Tax Ordinance 2001 (ITO) to define “specified financial instruments” to include crypto assets.
- A new tax schedule for crypto trading gains, with rates differentiated by how long the asset was held (akin to securities gains).
- Treatment of mining income as business income under section 18 of the ITO, allowing deductions for electricity, capital investment, and depreciation.
- Staking/yield-farming returns are treated as “income from other sources” under section 39 of the ITO.
- A voluntary disclosure regime for offshore holdings, allowing taxpayers to regularize past assets with a surcharge rather than amnesty, to align with the Organisation for Economic Co‑operation and Development’s Crypto-Asset Reporting Framework (CARF).
By aligning with CARF and the FATF’s Virtual Asset Service Providers (VASP) criteria, Pakistan aims to plug major gaps in its tax net. The plan would require local exchanges to register, report transaction data, implement KYC/AML protocols, and integrate into the national tax database.
For Pakistan, the stakes are high. Broadening the tax base and capturing digital-asset income can provide much-needed revenue as the economy deals with currency volatility, fiscal deficits, and IMF obligations.
For taxpayers and the crypto-community, it means that tax-free territory is shrinking. Those who trade, mine, stake, or hold offshore crypto must prepare for compliance. Early engagement and transparency will likely pay off.
What to Watch
- Draft legislation: The amendments to the ITO and rules under VAO 2025 (Virtual Assets Ordinance) will signal how strict or facilitative the regime will be.
- Exchange regulation: Whether domestic and foreign crypto-exchanges operating in Pakistan will be mandated to register, report, and deduct taxes at source.
- Disclosure window: The size and timing of any voluntary disclosure scheme will affect how many existing holders come clean.
- International link-up: Pakistan’s capacity to use CARF, connect with foreign tax information exchange, and trace offshore assets.
- Implementation timeline: How quickly the FBR moves from consultations to final rules, and how aggressively audits or withholding may begin.
In short, the FBR’s crypto-tax plans signal a shift: from regulatory silence to active oversight. For Pakistan’s digital economy to flourish under this new regime, clarity, fairness, and stakeholder dialogue will matter as much as enforcement.
by PK Tax Calculator