Netflix Prices for Pakistani Users May Rise after FBR’s tax notice
The Federal Board of Revenue (FBR) is making efforts towards expanding its tax net to manage the budget deficit. In this regard, the Board has recently issued a notice to Netflix, seeking the recovery of more than Rs. 200 million in income tax. The Additional Commissioner CTO Islamabad generated this demand over two different years under section 6 of the Income Tax Ordinance (ITO), 2001.
As Netflix like other tech companies does not have offices in Pakistan, the notice was served to Netflix’s Singapore office. Netflix offers various plans to its Pakistani viewers, ranging from Rs. 250 to Rs. 1,100 per month. In the tax year 2021, the company declared a staggering revenue of Rs. 1.3 billion in Pakistan alone. However, the new tax notice may lead to an increase in the prices of Netflix’s subscription plans.
Moreover, the sources say that offshore digital service providers have been using Double Taxation Agreements (DTA) to evade taxes. DTAs are contracts signed between two countries to prevent the same income from being taxed twice.
Section 6 of the Income Tax Ordinance 2001 was enacted to assure that the tax will be imposed on every non-resident person receiving Pakistan-source royalty fees for offshore digital services or technical services fees.
On the other hand, Netflix challenged the assessment orders before the Commissioner Appeal FBR through its tax consultant. However, the Commissioner has ruled in favor of the FBR.
Conclusively, the development highlights the Pakistani government’s growing focus on taxing digital service providers to expand the country’s tax net.
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