FBR Demands Rs. 200M in Taxes from Netflix

The Federal Board of Revenue (FBR) has issued a notice to Netflix, seeking the recovery of over Rs. 200 million in income tax, official sources told.

Netflix is a streaming service that offers a wide variety of award-winning TV shows, movies, anime, documentaries, and more on thousands of internet-connected devices.

According to the details, Netflix offers different plans ranging from Rs. 250 to Rs. 1,100 per month to its viewers, including those in Pakistan.

Sources revealed that the Additional Commissioner of the Central Tax Office (CTO) Islamabad has generated a demand of over Rs. 200 million for two different years, in accordance with Section 6 of the Income Tax Ordinance (ITO) 2001.

The company declared Rs. 1.3 billion in revenue in Pakistan during the tax year 2021 alone, sources added.

Sources also mentioned that Netflix and other companies provide offshore digital services without having offices in Pakistan.

The FBR served the notice to Netflix’s Singapore office, although the company has also established an office in the Netherlands, sources noted.

It has also emerged that companies providing offshore digital services are using Double Taxation Agreements (DTA) to allegedly evade taxes.

It is pertinent to note that a DTA is a contract signed by two countries to avoid or minimize double taxation of the same income by both countries.

It is worth mentioning that the government of Pakistan introduced Section 6 in the Income Tax Ordinance 2001 to bring every non-resident person who receives any Pakistan-source royalty fee for offshore digital services or fees for technical services under the tax net.

The Sindh Revenue Board was already taxing non-residents for offshore services, but now the FBR has also been imposing income tax on non-resident persons.

Sources stated that the company, through its tax consultant, challenged the assessment orders before the Commissioner of Appeals FBR. However, the Commissioner of Appeals decided in favor of the FBR.