The Sindh Revenue Board (SRB) has mandated that starting October 1, 2023, all banks must deduct 13 percent provincial sales tax on advertisement services. This decision by the SRB aims to enforce the taxation on advertisement services for payments made through banks to non-resident service providers like Facebook and Google.
Government officials revealed that the 13 percent provincial sales tax would be applicable to payments made via banks using any transaction mode, including credit card payments. Sources informed ProPakistani that banks in Pakistan have already begun imposing an additional 16 percent provisional sales tax on ad spending through credit cards, notably for platforms like Facebook ads.
This additional tax is in conjunction with the existing 0.8 percent DCC Merchant Fee and 16 percent FED on DCC Merchant Fee. The overall impact on ad spending is significant, with local payments incurring a total of Rs. 116.93 for every Rs. 100 spent on ads. For cross-border payments, additional charges include 4 percent forex charges and 5 percent AWT fees.
Notably, big tech companies operating from abroad have largely escaped taxation in Pakistan, leaving local media buying agencies and freelancers burdened with heavy taxation imposed by the Federal Board of Revenue (FBR). The SRB has designated all scheduled banks as collection agents for the deduction of sales tax on advertisement services, with banks now charging and collecting sales tax from service recipients in the province of Sindh.
The SRB has officially declared banks as withholding agents for this purpose, implementing the 13 percent sales tax on advertisement services when payments are made through banks, effective October 1, 2023. This move aims to address the taxation gap on big tech companies and alleviate the financial burden on local entities.
