Banks in Pakistan are now imposing a new tax on Netflix subscription fees; this “New Tax on Netflix Subscription Fees” impacts users who pay for their subscriptions via debit or credit cards. The Sindh Revenue Board (SRB) has introduced several taxes that increase the overall cost for Netflix subscribers in the region.

Breakdown of the New Tax on Netflix Subscription Fees

The new tax regime includes a 3 percent Sales Tax on IT Services, specifically targeting subscription payments made with debit or credit cards. Additionally, there is a 5 percent Advance Tax on International Transactions for filers. Furthermore, card transaction charges are now 4 percent plus a Federal Excise Duty. For non-filers, the advance tax on international transactions is set at 10 percent. Banks are now acting as withholding agents, collecting these taxes on behalf of the SRB, which initially introduced the Sindh Sales Tax Special Procedure (Tax on Specified Services) Rules, 2023. These rules specify that certain banks licensed by the State Bank of Pakistan must collect the sales tax on IT and advertisement services.

Impact and Compliance

As a result of these new taxes, Netflix subscribers in Pakistan are experiencing higher costs for their streaming services. The pricing structure, without taxes, is as follows: Mobile at Rs. 250/month, Basic at Rs. 450/month, Standard at Rs. 800/month, and Premium at Rs. 1,100/month. However, additional taxes may apply depending on the user’s location, which Netflix acknowledges on its website. The Finance Bill 2024 further solidifies the tax obligations for tech companies like Netflix, which have a digital presence in Pakistan. This move is aimed at ensuring that these companies contribute to the local tax system based on their earnings from Pakistani consumers. The Federal Board of Revenue (FBR) has also issued notices for tax recovery, emphasizing the government’s commitment to enforcing these regulations.

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