The Sindh Revenue Board (SRB) imposed taxes on Netflix. Banks now charge a new tax. This tax is for the video-on-demand streaming service in Pakistan.
OTT (Over-the-top) platform users must pay a 3 percent Sales Tax on IT Services. This applies when using debit or credit cards for subscription fees. There is also a 5 percent Advance Tax on International Transactions for filers. Card Transaction Charges are 4 percent plus Federal Excise Duty. Non-filers pay a different advance tax. They pay a 10 percent advance tax.
Banks collect these taxes for SRB. SRB first imposed the Sindh Sales Tax Special Procedure Rules, 2023. They specified certain banks as “collecting agents” for sales tax on IT and advertisement services.
The board imposed a 3 percent tax on services by software or IT consultants. This includes cloud-based content streaming services like Netflix. Payments made through a collection agent to a foreign service provider are taxed.
Netflix Subscription Prices to Reflect New Tax Rules
Netflix subscription prices (without taxes) are:
Mobile: Rs. 250/month
Basic: Rs. 450/month
Standard: Rs. 800/month
Premium: Rs. 1,100/month
This OTT (Over-the-top) platform mentions on its website that users may pay additional taxes based on their location.
It was reported the new Finance Bill 2024. This bill includes a tax on tech companies earning income in Pakistan. Netflix must pay this tax due to its business presence in Pakistan.
Consumers will cover the cost of these taxes. Last month, FBR served a notice to OTT (Over-the-top) platform. They demanded over Rs. 200 million in income tax. This is under section 6 of the Income Tax Ordinance, 2001. Some companies avoid taxes using Double Taxation Agreements (DTA).
DTA is a contract between two countries. It prevents double taxation of the same income. The government of Pakistan introduced section 6 in the Income Tax Ordinance, 2001. This brings every non-resident person who gets a Pakistan-source royalty fee for offshore digital services under tax laws.
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