Netflix users in Pakistan are facing higher costs due to new taxes imposed by the Sindh Revenue Board (SRB). Here’s a breakdown of the additional charges:
New Taxes:
- 3% Sales Tax on IT Services: This applies to all Netflix subscriptions paid for using debit or credit cards.
- 5% Advance Tax on International Transactions (Filers): Applicable to users who file income tax returns.
- 10% Advance Tax on International Transactions (Non-Filers): Applies to users who don’t file income tax returns.
- 4% Card Transaction Charge + Federal Excise Duty: Additional fees associated with card transactions.
Who’s Collecting These Taxes?
Banks are now acting as withholding agents for the SRB, meaning they’ll collect the new taxes at the time of subscription payment.
Basis for the Taxes:
The Sindh Sales Tax Special Procedure (Tax on Specified Services) Rules, 2023, authorize the SRB to levy taxes on IT services, including cloud-based streaming services like Netflix. Additionally, the Finance Bill 2024 aims to tax tech companies earning income digitally in Pakistan, making Netflix liable for taxes.
Impact on Consumers:
These new taxes will ultimately be passed on to consumers, resulting in higher subscription fees.
Previous Actions:
- The FBR (Federal Board of Revenue) issued a notice to Netflix for recovery of over Rs. 200 million in income tax.
- Concerns have been raised about companies using Double Taxation Agreements (DTA) to avoid taxes on offshore digital services.
Conclusion:
Netflix users in Pakistan should expect to pay more for their subscriptions due to the implementation of these new taxes. The government aims to collect taxes from tech companies operating in the country and close potential loopholes used for tax evasion.
