Tax on Shopify Dropshipping Income in Pakistan (TY 2025-26)
Shopify dropshipping tax in Pakistan TY 2025-26 - Stripe/PayPal remittance, Section 154 export WHT, AliExpress sourcing costs, FBR slabs, and audit prep.
Worked example: Rs 200,000 per month
Annual income Rs 2,400,000 - here's how it would be taxed both ways under Finance Act 2025.
| Taxable income band | Rate | Income in band | Tax in band |
|---|---|---|---|
| Up to Rs 600,000 | 0% | Rs 600,000 | Rs 0 |
| Rs 600,001 – Rs 1,200,000 | 15% | Rs 600,000 | Rs 90,000 |
| Rs 1,200,001 – Rs 1,600,000 | 20% | Rs 400,000 | Rs 80,000 |
| Rs 1,600,001 – Rs 3,200,000 | 30% | Rs 800,000 | Rs 240,000 |
| Total slab tax | Rs 410,000 | ||
How Shopify dropshipping is taxed in Pakistan
If you operate a Shopify store from Pakistan selling to overseas customers, your gross revenue lands in your bank via Stripe (where available via partners), PayPal-to-Wise, or 2Checkout. The receipts are foreign-source business income subject to Section 154 export WHT - 1% (filer) / 2% (non-filer) - at bank realisation. Section 154 is generally final tax for individual exporters, but a high-volume dropshipper with thin margins often elects business-income treatment and claims deductions instead.
Cost-of-goods and the AliExpress problem
Most dropshippers source inventory through AliExpress, CJ Dropshipping, or Spocket - but those payments leave Pakistan as outward remittance, often via personal cards or Wise. FBR will allow these as cost-of-goods only if you have proper invoices and bank evidence linking each outward payment to a specific customer order. Maintain a spreadsheet correlating Shopify order IDs with AliExpress order IDs and the Wise/card transaction reference; FBR audits routinely target dropshippers for undocumented COGS.
Ad spend on Meta and Google
Facebook/Instagram and Google ads are the largest expense for most dropshippers. They are fully deductible if you pay them from a documented business account and have the platform's tax invoice (downloadable from the ad account billing centre). Pay attention to Meta's Pakistan billing entity - most charges route through Meta Ireland and the invoice mentions VAT (zero for Pakistani business buyers if you provide your NTN). Keep monthly Meta and Google billing summaries.
Filing path and Section 154 choice
Register for NTN, file annual return before 30 September. Compute total Section 154 WHT already deducted by your bank, then compare two scenarios: (a) accept Section 154 as final tax - simpler, but you can't deduct ad spend or COGS; (b) elect business-income treatment with deductions - heavier paperwork, but typically much better for dropshippers because ad spend often eats 40%+ of revenue. Most Pakistani dropshippers go with option (b).
Frequently asked questions
Is Shopify dropshipping income taxable in Pakistan?
Yes. Shopify revenue paid into Pakistan via Stripe/PayPal/Wise is foreign-source business income - Section 154 export WHT applies and the income is taxable.
Can I deduct Facebook ad spend from dropshipping income?
Yes if you file under business-income treatment with deductions. Meta/Google ad invoices (downloadable from billing) are fully deductible business expenses.
How do I prove AliExpress costs to FBR?
Maintain a spreadsheet linking each Shopify order ID to its AliExpress order and the outward Wise/card payment reference. Without that link, FBR routinely disallows the COGS.
Does PSEB cover Shopify dropshipping?
No. PSEB is for IT and digital services exporters. Physical goods (including dropshipped products) fall under the regular Section 154 export regime.
Final tax or slab rates - which works for dropshippers?
Most dropshippers elect business-income (slab rates) with deductions because ad spend and COGS typically consume 60–80% of revenue. Final tax on gross would be punitive.