FBR has issued a tax notice to Netflix for the recovery of over Rs. 200 million ($1.4 million) in income tax, according to sources.
The streaming giant offers its service in Pakistan with monthly subscription plans ranging from Rs. 250 to Rs. 1,100. While Netflix has declared Rs. 1.3 billion in revenue for 2021 in Pakistan alone, sources claim the company has not been paying income tax.
The crux of the issue lies in Netflix’s lack of a physical presence in Pakistan. The company operates through offshore digital services, allegedly using Double Taxation Agreements (DTA) to avoid taxes. However, Section 6 of the Income Tax Ordinance 2001 allows Pakistan to tax non-resident companies earning income from the country.
FBR’s notice targets Netflix’s Singapore office, though the company has also established an office in the Netherlands. This move follows similar actions taken by the Sindh Revenue Board, which already taxes non-residents for offshore services.
Netflix reportedly challenged the FBR’s assessment order through a tax consultant, but the Commissioner Appeal sided with the FBR. The outcome of this case could set a precedent for how Pakistan taxes other companies providing offshore digital services.
