Pakistan’s FBR Issues Rs. 200 Million Tax Notice to Netflix

Pakistan's FBR Issues Rs. 200 Million Tax Notice to Netflix

The Federal Board of Revenue (FBR) has reissued a depute to Netflix for the recovery of over Rs . 200 million in income tax.

Netflix, a streaming offering a range of award-winning TV shows, films, anime, documentaries, and more, offers diverse subscription projects to its Pakistani viewers, varying from Rs . 250 to Rs . 1, 100 per month.

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Sources informed that the Additional Commissioner of the CTO Islamabad has demanded over Rs. 200 million from Netflix for two different years under section 6 of the Income Tax Ordinance (ITO), 2001. Netflix reportedly declared Rs. 1.3 billion in revenue from Pakistan alone during the tax year 2021.

Sources indicated that Netflix and other companies are offering offshore digital services without having offices in Pakistan. The FBR served the notice to Netflix’s office in Singapore, although Netflix also established an office in the Netherlands earlier.

It has added to know that enterprises presenting digital offerings abroad are reportedly abusing Double Taxation Agreements (DTAs) to steer clear of paying taxes. A bilateral trade agreement (DTA) is a general agreement between two nations to avert or decrease earnings double taxation.

The Pakistani government introduced section 6 in the Income Tax Ordinance 2001 to tax non-resident individuals or entities receiving Pakistan-source royalty fees for offshore digital services or technical services. While the Sindh Revenue Board was already taxing non-residents for offshore services, the FBR has now also started imposing income tax on non-resident entities.

Sources further stated 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 favour of the FBR.

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