Banks Implement New Tax on Netflix Subscription Fees in Pakistan
After imposing a 13 percent provincial sales tax on advertisement services last year, the Sindh Revenue Board (SRB) has now added new taxes on Netflix in Pakistan.
Banks are charging a new tax on the video streaming service, affecting Netflix users who pay with debit or credit cards. Users are now subjected to:
- A 3 percent Sales Tax on IT Services
- A 5 percent Advance Tax on International Transactions (for filers)
- Card Transaction Charges of 4 percent plus a Federal Excise Duty
Banks are acting as withholding agents for SRB to collect these additional taxes. This follows the SRB’s imposition of the Sindh Sales Tax Special Procedure Rules, 2023, which designated certain banks and entities as “collecting agents” for sales tax on IT and advertisement services.
As a result, a 3 percent tax is applied to services by software or IT-based system development consultants, including cloud-based streaming services like Netflix.
Here are the pricing details for Netflix in Pakistan (excluding taxes):
- Mobile: Rs. 250/month
- Basic: Rs. 450/month
- Standard: Rs. 800/month
- Premium: Rs. 1,100/month
Netflix states on its website that users may be charged additional taxes based on their location.
Additionally, the new Finance Bill 2024 includes a tax on tech companies earning income in Pakistan through digital means. Consequently, Netflix must pay taxes due to its business presence in the country.
These taxes will be passed on to consumers.
Last month, the Federal Board of Revenue (FBR) served a notice to Netflix for recovering over Rs. 200 million in income tax as per section 6 of the Income Tax Ordinance (ITO) 2001. Companies providing offshore digital services often use Double Taxation Agreements (DTA) to avoid taxes, but section 6 of the ITO 2001 aims to bring non-resident entities earning Pakistan-source income into the tax net.
