Is Youtube income tax exempt in Pakistan? [Foreign income / IT sector exempted]

[Nabs]

I was under the impression that Youtube income is tax exempt as foreign remittances are tax exempt as per 111(4) of Income Tax Ordinance which says that if foreign remittance is encashed in rupee account and Proceed Realization Certificate is obtained, then its tax exempt.

But I just read a news article about Youtuber Nadir Ali getting a 13 million rupee tax notice from FBR.
https://www.dawn.com/news/1547335

Banks don't even allow remittance in dollar accounts these days from Google. So all Youtube payments are encashed into rupees at local banks. So why is FBR going after Youtubers? Is FBR not following its own tax laws? or am I missing something here.

I have sent an email to FBR about this, lets see if they reply.

[aziz.rehan]

They are just making money for themselves not for benefit of people or country.Straight facts.Law is only made for poor people not for the well off people.

[Massive_One]

Youtuber Nadir Ali getting a 13 million rupee tax notice from FBR.

13 million tax... OMG... itna to jahangir tareen bhi nahi deta hoga

[Massive_One]

okay, two things i read from an article, and i will quote ...

"The FBR investigation reveals that Nadir Ali’s tax returns do not
contain a full record of his income. This led to suspicion of
concealment of income. FBR later verified from YouTube that Nadir
received an income of Rs 2.186 million in 2017, Rs 28.335 million in
2018 and Rs 46.762 million in 2019.Then there’s also 10 million rupees of foreign exchange for one year as well"

"Foreign Remittance tax and income tax are two separate forms of taxes. Foreign remittances
exceeding Rs 5 million do not attract any addition to income chargeable
to tax, but if the source of foreign remittance is not explainable, such
amount will be added to income chargeable to tax.Even
freelancers can not be spared against these tax laws. If someone seems
like getting away from it, that is probably he/she isn’t under the FBR’s
radar yet."

"If you are work while being in Pakistan the income is taxable. IT is an exception.
Foreign remittance is of people working outside of Pakistan and sending money."

[Nabs]

okay, two things i read from an article, and i will quote ...

"Foreign Remittance tax and income tax are two separate forms of taxes. Foreign remittances
exceeding Rs 5 million do not attract any addition to income chargeable
to tax, but if the source of foreign remittance is not explainable, such
amount will be added to income chargeable to tax.Even
freelancers can not be spared against these tax laws. If someone seems
like getting away from it, that is probably he/she isn’t under the FBR’s
radar yet."

"If you are work while being in Pakistan the income is taxable. IT is an exception.
Foreign remittance is of people working outside of Pakistan and sending money."

These are just comments posted on ProPakistani, so its validity is unconfirmed.

There is no mention of overseas Pakistanis for remittances. Here is what it says in ordinance.

Income Tax Ordinance

111. Unexplained income or assets.

(1) Where —
(a) any amount is credited in a person’s books of account;
(b) a person has made any investment or is the owner of any money or valuable article;
(c) a person has incurred any expenditure2[; or]

(d) any person has concealed income or furnished inaccurate particulars of income including...
...
(4) Sub-section (1) does not apply,—
(a) to any amount of foreign exchange remitted from outside Pakistan through normal banking channels 4[not exceeding 5[five] million Rupees in a tax year] that is encashed into rupees by a scheduled bank and a certificate from such bank is produced to that effect.

It doesn't say in Ordinance what happens above 5 million. But State bank says there is no tax above 5 million in this article, FBR will just ask for source of income.

So, by law, if a Youtuber has Proceed Realization Certificates for foreign remittances, there is no income tax.

[Massive_One]

These are just comments posted on ProPakistani, so its validity is unconfirmed.

indeed!!

So, by law, if a Youtuber has Proceed Realization Certificates for foreign remittances, there is no income tax.

i also think the same!

i think what happened is that since Nadir Ali (or anybody for that matter) registered with FBR to pay his taxes in earlier years, hence the authorities become sniff dogs and catch the ones who are willing to pay taxes.. otherwise, a lot of tax evaders are roaming around happily : /

[Nabs]

Yup it seems they are just fishing. If Nadir Ali has PRC from bank, then he just have to show FBR those certificates as proof of tax exempt income. If FBR still insists on tax claim, then he should take it to court, the tax claim then should be dismissed by the judge.

[Nabs]

Just want to update that FBR has responded to my query and according to them foreign remittances are tax exempt if you've encashment certificate (PRC). As expected!

So I believe Nadir Ali's case has more to do with under-reporting income, putting nill returns when there is income, and not providing encashment certificates when FBR initially called for records.

It is important to mention here that FBR is no longer required by law to send printed notices. You only get an email. Most people leave everything to their tax agents and will definitely miss those emails if only tax agent looks after that email account. Happened with me a few years ago - my stupid agent also submitted nill returns for two years. I stopped relying on tax agents and furnish my own returns now.

[moneebariffast]

Hi, Nab i am also a freelancer i read your post you under go audit in past years so what we need just
PRC enough?

[Nabs]

Yes, PRC is enough. But it must show remittance purpose code, remittance amount and conversion rate. My PRC shows code 9185: "Other Computer Services". But it doesn't matter if its related to IT or not. All remittances with PRC are exempt from income tax.

[Nabs]

I don't think there should be a problem. But you should contact FBR on their website and confirm if code is required.

I contacted FBR and they told me that income tax is exempt if I have PRC, based on 111(4) of income tax ordinance.

[moneebariffast]

In which bank you have account i have in asakri

[Nabs]

Bank Al Habib

[moneebariffast]

how much time they took to issue prc?

[chantalgardener]

is it true that Pakistan has proposed to tax the tech giants like Facebook and Google to expand the country's tax net

[UAHMAD]

Useful thread. Many YouTubers (individuals and household) are unaware of this info.

Post no. 8 is also pertinent in understanding why 'nil' returns can be dangerous while filing.

Nice effort.

[Nabs]

how much time they took to issue prc?

2 minutes. They already have system in place. Just request prc at branch and they will print one for you. Make sure to get it signed and stamped by bank.

[eliananova01]

So, if you are an Pakistani YouTuber who gets views for your content from the US audience, the earnings from those views will be deducted in the form of taxes. The platform will start deducting taxes from June this year and the tax withholding rate on royalties is 15 percent for Indian YouTubers

[Nabs]

Due to treaty between Pakistan and US, there is 0% withholding tax on Pakistani Youtubers. India also has treaty with US, but the agreed rate is 15% for this kind of revenue.

[portmanemma1]

The Federal Board of Revenue (FBR) has warned digital platforms that it will not allow Google, Facebook, and Youtube to operate in Pakistan without payment of taxes. Foreign-source income of returning expatriates (citizens of Pakistan who were not resident in Pakistan during any of the preceding four tax years) shall be exempt from tax in the tax year of return and the succeeding tax year.