The Federal Board of Revenue has proposed the amendments to the Income Tax Rules and has given seven days for objections to these amendments. These special procedures have been notified by exercising the special powers available to Finance Minister Muhammad Aurangzeb to change these rules.
The law states that the FBR, with the approval of the minister-in-charge (finance minister), may, by notification in the official Gazette, prescribe a special procedure for the scope and payment of tax, record keeping, filing of returns and assessment in respect of small businesses, construction businesses, medical practitioners, hospitals, educational institutions and any other sector specified by the FBR with the approval of the Minister-in-charge, in such cities or territories as may be specified.
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The FBR has proposed that it will charge Rs195 “per 1,000 views on the video shared on YouTube”. For the purpose of this special procedure, it shall be taken as Rs195 and is subject to revision from time to time.
At present, the revenue per mille (per thousand) usually ranges from $1 to $3 but can go as high as $9 if the audience is in the United States and Canada.
The Rs195 per 1,000 views from income earned from Pakistan could translate into a 16% to 66% rate. Such a measure cannot be enforced without the active support of YouTube management.
The FBR stated that the proposed special procedure will only apply to the computation of the income of non-resident persons earning from remunerative social media content viewed in Pakistan.
“Every non-resident person deriving income from interaction with users in Pakistan through social media platforms, to the extent such income constitutes Pakistan-source income,” state the proposed rules.
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This would impact only those non-resident Pakistanis who are based abroad, mainly in the US, Canada or the United Kingdom, producing content on Pakistan’s politics and economy that is viewed in Pakistan. There are a handful of non-resident Pakistanis who would be affected by these special procedures.
The FBR said that these rules would be applicable to the systematic and continuous solicitation of business activities or engagement in interaction through digital means only to those YouTubers who have over 50,000 users a year or 12,250 in a quarter.
“The threshold for the number of users for the purposes of these rules will be exceeding fifty thousand users during a tax year or twelve thousand two hundred and fifty users during a quarter,” read the rules.
The FBR said that the minimum income of a person from remunerative social media content shall be calculated based on total remuneration received from social media content, minus total expenses made, up to a maximum of 30% of total revenue.
The total remuneration received by a person from remunerative social media content shall be the higher of revenue per mille multiplied by the average number of views per content, multiplied by the total number of posts during the year, or the actual remuneration received by a person from the social media content, whether received in cash or kind.
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Every YouTuber falling under this new special procedure will pay advance income tax. The declaration of such income shall be made in a special part of the income tax return for each tax year.
The FBR said that where the declaration of income is less than the amount calculated, the relevant Inland Revenue Commissioner may rectify this error of omission or commission in the return and proceed to recover the amount due from the taxpayer as per the provisions of the Income Tax Ordinance, 2001.