The Federal Board of Revenue (FBR) has issued a notice to Netflix, demanding the recovery of over Rs. 200 million in unpaid income tax, according to official sources speaking to ProPakistani.
Netflix, a global streaming giant offering a wide range of TV shows, movies, anime, and documentaries, has various subscription plans in Pakistan ranging from Rs. 250 to Rs. 1,100 per month.
Despite not having a physical presence in Pakistan, Netflix has declared huge revenue from its Pakistani user base. In the tax year 2021 alone, Netflix reported Rs. 1.3 billion in revenue from Pakistan.
The Additional Commissioner of the Corporate Tax Office (CTO) in Islamabad has raised a tax demand for over Rs. 200 million for two different years, as per section 6 of the Income Tax Ordinance, 2001. This section aims to tax non-resident entities receiving Pakistan-source income from royalty or technical services fees.
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Sources revealed that the FBR served the tax notice to Netflix’s office in Singapore. The issue arises from companies providing offshore digital services and leveraging Double Taxation Agreements (DTAs) to allegedly evade tax liabilities in Pakistan. DTAs are treaties between two countries designed to prevent double taxation of the same income.
The introduction of section 6 in the Income Tax Ordinance 2001 by the Pakistani government seeks to ensure that non-resident entities, like Netflix, pay taxes on income derived from services provided to Pakistani consumers.
