The federal cabinet has approved a framework that requires social media companies to operate in accordance with the rules and regulations of the Pakistani government.
According to this structure, the social media giants including Facebook, Google, YouTube and Twitter will have to open their offices in the country and file taxes directly with the Federal Board of Revenue (FBR).
The FBR has set a revenue collection target of Rs. 10 billion from the social media sector for the 2021-22 fiscal year. However, due to the lack of social media offices in the country, the FBR is expected to fall short of the target.
He is going to collect only part of this goal, and this is also by deducting taxes from users of these companies in the country for using their digital services.
The government amended subparagraph 22B to section 2 and amended section 6 of the Income Tax Ordinance through the Financial Act, imposing a 15% commission on all offshore digital services.
Income Tax Ordinance will apply on social media applications
The purpose of the amendments to the Income Tax Ordinance is to impose taxes on a range of digital business activities, including virtual goods such as software, websites, apps and other digital assets. It also provides for the provision of digital services such as online sales and purchases, online advertising. as well as digital analysis of consumers taking into account the tax network.
The rationale behind this move is to collect most of the taxes from offshore social networks for the provision of digital services in the country, instead of collecting taxes from citizens through a payback mechanism for using their digital services.
With taxes on the social media industry expected to remain near zero despite amendments to the Income Tax Ordinance, the government has decided to introduce a structure that requires tech giants to open their offices and operate directly from the country.