Sindh Revenue Board Imposes Additional Taxes on Netflix in Pakistan

In a strategic move to broaden its tax net, the Sindh Revenue Board (SRB) has imposed new taxes on Netflix in Pakistan, the popular video-on-demand streaming service. Following the imposition of a 13 percent provincial sales tax on advertisement services last year, the SRB has now set its sights on digital streaming services, introducing new charges for Netflix users in Pakistan.

New Taxes and Charges for Netflix in Pakistan:

• 3% Sales Tax on IT Services: This tax applies to Netflix subscription fees paid via debit or credit cards.
• 5% Advance Tax on International Transactions (Filers): Filers must pay this tax on their international transactions.
• 10% Advance Tax for Non-ATL Individuals: Non-filers face a higher advance tax rate of 10 percent on international transactions.
• Card Transaction Charges: Set at 4 percent, along with a Federal Excise Duty.

Banks have been appointed as withholding agents to collect these taxes on behalf of the SRB. This step is part of the Sindh Sales Tax Special Procedure (Tax on Specified Services) Rules, 2023. Under these rules, certain banks and other entities authorized by the State Bank of Pakistan are designated as “collecting agents” for sales tax on IT and advertisement services.

The imposition includes a 3 percent tax rate on services provided by software or IT-based system development consultants, which encompasses cloud-based content streaming services like Netflix.

Subscription Pricing (PKR/without taxes):

• Mobile: Rs. 250/month
• Basic: Rs. 450/month
• Standard: Rs. 800/month
• Premium: Rs. 1,100/month

Netflix’s website indicates that, depending on the user’s location, additional taxes may be applied to their subscription price. The recently introduced Finance Bill 2024 now incorporates a tax on tech companies generating income through digital means in Pakistan. Consequently, Netflix, with its substantial business presence in the country, is now obligated to pay taxes for charging consumers in the region.

Impact on Consumers:

The introduction of these taxes signifies that the financial burden will ultimately be transferred to consumers. As banks act as withholding agents, Netflix subscribers will see an increase in their subscription costs due to the added taxes and charges.

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