Netflix has received a letter from the Federal Board of Revenue (FBR) demanding the collection of approximately Rs. 200 million in unpaid income tax.
Across hundreds of internet-connected devices, Netflix is a streaming service that provides a vast selection of highly acclaimed TV series, films, animation, documentaries, and more.
The information indicates that Netflix offers its customers a variety of plans that range in price from Rs. 250 to Rs. 1,100 per month, and consumers in Pakistan were also granted Netflix memberships.
In accordance with section 6 of the ITO, 2001, reports revealed that Additional Commissioner CTO Islamabad had created a demand of more over Rs. 200 million in two distinct years.
According to reports, the corporation reported earning Rs. 1.3 billion in income in Pakistan alone for the 2021 tax year. Netflix and a few other businesses offer digital services abroad without having offices in Pakistan.
Netflix had already opened an office in the Netherlands in addition to receiving notification from the FBR regarding its operations in Singapore. Additionally, it has come to light that businesses providing offshore digital services are purportedly avoiding taxes by using Double Taxation Agreements (DTAs).
It is important to remember that a DTA is an agreement between two nations to prevent or lessen (minimize) territorial double taxation on the same income by those nations.
The Income Tax Ordinance of 2001, which was established by the Pakistani government, has a part that requires non-resident individuals who earn royalty fees for offshore digital services or fees for technical services that are sourced from Pakistan to pay taxes.
