The Federal Board of Revenue (FBR) has issued a notice to Netflix, demanding the recovery of over Rs. 200 million in income tax, as reported by official sources to ProPakistani.
Netflix, a streaming service offering a diverse array of award-winning TV shows, movies, anime, and documentaries on various internet-connected devices, has been providing different subscription plans to its viewers in Pakistan, ranging from Rs. 250 to Rs. 1,100 per month.
According to details, the Additional Commissioner of the CTO Islamabad has raised a demand of over Rs. 200 million for two different years, in accordance with Section 6 of the Income Tax Ordinance (ITO) 2001. Sources revealed that Netflix declared Rs. 1.3 billion in revenue for the tax year 2021 in Pakistan alone.
The sources further noted that Netflix, along with other companies, is offering offshore digital services without having a physical presence in Pakistan. The FBR served the tax notice to Netflix’s office in Singapore, though the company also has an office in the Netherlands.
It has come to light that some companies providing offshore digital services are allegedly using Double Taxation Agreements (DTA) to evade taxes. DTAs are contracts between two countries aimed at preventing or minimizing double taxation of the same income.
The government of Pakistan introduced Section 6 in the Income Tax Ordinance 2001 to ensure that non-resident individuals who receive Pakistan-source royalties or fees for offshore digital or technical services are taxed. While the Sindh Revenue Board had already been taxing non-residents for offshore services, the FBR has now also begun imposing income tax on non-resident entities.
Sources mentioned that Netflix, through its tax consultant, challenged the assessment orders before the Commissioner of Appeals at the FBR. However, the Commissioner of Appeals ruled in favor of the FBR.
