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Pakistani banks to charge new taxes on Netflix services in the country

KARACHI/ISLAMABAD: The Sindh Revenue Board (SRB) has imposed additional taxes on the video-on-demand internet streaming service Netflix, with banks now charging new taxes on it in Pakistan.

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

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

Under these rules, the SRB has imposed a 3% Sindh sales tax on certain services, including cloud-based content streaming platforms like Netflix. This tax must be collected by banks and other authorized payment processors when Netflix users in the relevant jurisdiction make payments.

In September 2023, the SRB introduced the “Sindh Sales Tax Special Procedure (Tax on Specified Services) Rules, 2023” to facilitate the collection of this 3% tax on cloud-based content streaming services like Netflix, especially where payments are made to a service provider not residing in Pakistan.

Netflix offers several subscription tiers in the region, with prices ranging from Rs. 250 per month for the Mobile plan to Rs. 1,100 per month for the Premium plan. On its website, Netflix states that customers may be charged additional taxes depending on their location, on top of the base subscription fees.

Additionally, a new Finance Bill introduced in 2024 imposes a tax on tech companies like Netflix that earn income in Pakistan through digital means and presence, even without a physical establishment.

Last month, the Federal Board of Revenue (FBR) issued a tax recovery notice to Netflix for over 200 million Pakistani rupees in unpaid income tax, invoking Section 6 of the Income Tax Ordinance (ITO) of 2001.

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I am an experienced writer, analyst, and author. My exposure in English journalism spans more than 28 years. In the past, I have been working with daily The Muslim (Lahore Bureau), daily Business Recorder (Lahore/Islamabad Bureaus), Daily Times, Islamabad, daily The Nation (Lahore and Karachi). With daily The Nation, I have served as Resident Editor, Karachi. Since 2009, I have been working as a Freelance Writer/Editor for American organizations.

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