Pakistan banks to charge new taxes on Netflix subscription fees

The Sindh Revenue Board (SRB) has imposed additional taxes on the video-on-demand Internet streaming service, Netflix, as the banks will charge a new tax on it in Pakistan, reported 24NewsHD TV channel on Monday.

Netflix users are now subjected to a 3% sales tax on IT services, a 5% advance tax on international transactions for filers, a 4% card transaction charge, and a federal excise duty when paying their Netflix subscription fees with debit or credit cards.

The SRB has implemented new tax rules that designate banks and other financial entities authorized by the State Bank of Pakistan as “collecting agents.”

Under these rules, the SRB has imposed a 3% Sindh sales tax on certain services, including cloud-based content streaming platforms like Netflix.

The SRB has mandated that a 3% tax must be collected by the banks and other authorized payment processors when Netflix users in the relevant jurisdiction make payments to Netflix using any means.

The SRB imposed these new “Sindh Sales Tax Special Procedure (Tax on Specified Services) Rules, 2023” in September 2023 to facilitate the collection of this 3% tax on cloud-based content streaming services like Netflix, where payments are made to a service provider not residing in Pakistan.

Netflix offers several subscription tiers in the region, with prices ranging from Rs250 per month for the Mobile plan up to Rs1,100 per month for the Premium plan.

Netflix states on its website that customers may be charged additional taxes depending on their location, on top of the base subscription fees.

Recently, a new Finance Bill was introduced in 2024 that imposes a tax on tech companies like Netflix that earn income in Pakistan through digital means and presence, even without a physical establishment.

Last month, the Federal Board of Revenue (FBR) issued a tax recovery notice to Netflix for over 200 million Pakistani rupees in unpaid income tax, invoking Section 6 of the Income Tax Ordinance (ITO) of 2001.