New taxes imposed on Netflix subscriptions in Pakistan

KARACHI: The Sindh Revenue Board (SRB) has imposed additional taxes on the video-on-demand Internet streaming service, Netflix, as the banks will charge a new tax on it in Pakistan.

Netflix users are now subjected to a 3 per cent sales tax on IT services, a 5 per cent advance tax on international transactions for filers, a 4 per cent card transaction charge, and a federal excise duty when paying their Netflix subscription fees with debit or credit cards.

SRB has implemented new tax rules that designate banks and other financial entities authorized by the State Bank of Pakistan as “collecting agents.”

Netflix offers several subscription tiers in the region, with prices ranging from Rs. 250 per month for the Mobile plan up to Rs. 1,100 per month for the Premium plan.

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Netflix states on its website that customers may be charged additional taxes depending on their location, on top of the base subscription fees.

The new Finance Bill 2024 now includes a tax on tech companies that earn income in Pakistan through digital means/presence. This way, Netflix due to its business presence in Pakistan is now liable to pay tax for charging customers in the region.

The impact of these taxes will be covered by making consumers pay.

 FBR last month served a notice to Netflix for recovery of over Rs. 200 million in income tax as per section 6 of ITO, 2001. It has also emerged that companies rendering offshore digital services are hiding behind Double Taxation Agreements (DTA) to allegedly evade the tax.