Pakistan Considers Capital Gains Tax on Cryptocurrency Transactions

The Pakistani government is set to introduce a capital gains tax on cryptocurrency transactions, aiming to regulate the rapidly expanding digital asset market. The proposed tax rate would range between 20% and 30%, with the final decision yet to be announced.

According to a report by the Federal Tax Ombudsman (FTO), there are approximately nine million cryptocurrency users in Pakistan, making it one of the world's leading countries in cryptocurrency adoption. The FTO notes that significant cryptocurrency-related commercial activity is currently taking place outside the country's tax framework, resulting in undocumented and untaxed transactions.

The government's plan to expand Section 37 of the Income Tax Ordinance, 2001, would classify crypto assets as specified financial instruments, similar to those applicable to listed securities. Gains on cryptocurrency disposals would be taxed on a realised basis using the First-In, First-Out (FIFO) valuation method.