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The Federal Board of Revenue (FBR) has issued a notice to Netflix to recover over Rs.200 million in taxable income, official sources said.

Netflix is a service that streams TV shows, movies and cartoons or documentaries on thousands of Internet-connected devices. Netflix has reportedly offered plans ranging from Rs. 250 ~ Rs. 1,100 per month for viewers and viewers residing in Pakistan who have obtained a Netflix subscription.Additional Commissioner Islamabad made a demand of over Rs.  200 million over two years under Section 6 of the ITO,2001.

According to reports,The company has declared revenues of $1.3 billion in Pakistan alone , in fiscal year 2021.Netflix and other companies that offer digital services abroad are reported not to have an office in Pakistan.The FBR has issued a notice to Netflix"s office in Singapore, but sources said it has already set up an office in the Netherlands.

Foreign digital service companies have also been found to be hiding behind Double Taxation Agreements (DTAs) to avoid taxation.It should be noted that a DTA is an agreement entered into by two countries to avoid or reduce (minimize) local taxes on the same income from both countries.Here, the Government of Pakistan has introduced Section 6 of the Income Tax Act, 2001 to allow all non-residents to receive royalties or fees for Pakistani technical services or for foreign digital services.The Sindh Board of Revenue collects income tax from non-residents for foreign services, but now the FBR levies income tax on non-residents.

According to reports, the company through its tax advisor challenged the pre-appeal assessment order before the FBR director, but the FBR appellate director upheld it.