Banks Start Charging New Taxes on Netflix Subscriptions in Pakistan

In Pakistan, watching Netflix just became more expensive. The Sindh Revenue Board (SRB) has introduced new taxes on the popular streaming service, and banks are now responsible for collecting these fees from users. This follows a similar move last year when banks were made to deduct provincial sales tax on advertisement services. Let’s dive into what this means for Netflix users in Pakistan.

New Taxes on Netflix Subscriptions

If you’re a Netflix subscriber in Pakistan, you’ll notice some changes in your billing. There is now a 3 percent Sales Tax on IT Services when you pay your subscription fee using a debit or credit card. Additionally, there’s a 5 percent Advance Tax on International Transactions for tax filers, along with a 4 percent Card Transaction Charge plus a Federal Excise Duty. For those who are non-filers, the advance tax on international transactions is set at 10 percent.

Banks are acting as withholding agents for the SRB, meaning they are collecting these new taxes directly from Netflix users. This is part of the Sindh Sales Tax Special Procedure Rules, 2023, which were put into effect in late September 2023. These rules specify that banks and other entities authorized by the State Bank of Pakistan act as “collecting agents” for sales tax on IT and advertisement services.

Impact on Subscription Prices

Here’s a breakdown of Netflix subscription prices in Pakistan without the new taxes:

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

With the new taxes, the actual cost of these subscriptions will be higher. On its website, Netflix mentions that users might be charged additional taxes depending on their location. These new taxes are likely to be felt by consumers, making the overall subscription cost more expensive.

Government Measures and Digital Taxes

Last week, ProPakistani reported that the new Finance Bill 2024 has introduced taxes on tech companies that earn income in Pakistan through digital means. Because of its business presence in the country, Netflix now has to pay taxes for charging customers in this region. This means that the burden of these taxes will ultimately fall on the consumers.

Moreover, the Federal Board of Revenue (FBR) recently served a notice to Netflix to recover over Rs. 200 million in income tax as per section 6 of the Income Tax Ordinance, 2001. Some offshore digital service companies are reportedly trying to evade these taxes by hiding behind Double Taxation Agreements (DTA).

What is a Double Taxation Agreement?

A Double Taxation Agreement (DTA) is a contract between two countries to avoid or minimize taxing the same income in both countries. Pakistan’s government has introduced section 6 in the Income Tax Ordinance 2001 to ensure that non-resident individuals or companies receiving income from Pakistan, like royalty fees or fees for technical services, pay their due taxes.

What This Means for Netflix Users

The new taxes mean that Netflix subscriptions will be more expensive in Pakistan. Banks will automatically deduct these taxes, so users will see higher charges on their statements. While this may seem like a small change, it adds up over time, making it more costly to enjoy your favorite shows and movies on Netflix.

As the government continues to enforce these tax rules, it’s important for consumers to stay informed about how these changes affect their wallets. For now, it looks like watching Netflix in Pakistan will come with a few extra costs, thanks to these new tax rules.

Stay tuned for more updates on this story as it develops, and keep an eye on your Netflix bills to see how these changes impact you.