The Federal Board of Revenue has introduced a special procedure for taxing income earned from remunerative social media content, setting a minimum revenue benchmark of Rs. 195 for every 1,000 YouTube video views and allowing expenses of up to 30% of total revenue.
The notified rules establish separate procedures for resident and non-resident persons earning income through social media platforms. Under the new rules, income from remunerative social media content would be calculated by deducting allowable expenses from total remuneration received. Expenses would be capped at 30% of total revenue.
The FBR said total remuneration would be determined as the higher of two amounts: revenue calculated at the prescribed rate of Rs. 195 per 1,000 views, or the actual remuneration received from social media content, whether in cash or in kind. The Rs. 195 revenue-per-mille rate applies to videos shared on YouTube and is subject to revision from time to time, according to the notification.
“If a person is of the view that the total remuneration received is less than” the amount calculated using the prescribed revenue-per-mille rate, the person will have to provide evidence to the satisfaction of the relevant commissioner, it said.
Separate rules for residents and non-residents
The rules also introduce a special procedure for resident persons earning income from remunerative social media content. The rules apply to every resident person deriving income from interaction with users in Pakistan through social media platforms.
For non-residents, a special procedure has been set to income derived from interaction with users in Pakistan through social media platforms where that income qualifies as Pakistan-source income under the Income Tax Ordinance, 2001. The non-resident rules also establish a threshold for determining whether activities amount to “systemic and continuous soliciting of business activities or engaging in interaction through digital means.”
A non-resident person would fall within the prescribed threshold if the number of users exceeds 50,000 during a tax year or 12,250 users during a quarter, according to the SRO.
Advance tax and income declaration
Both procedures require persons covered by the rules to pay advance income tax for each quarter. The advance tax is to be calculated using the prescribed income computation and remuneration rules and will be payable or recoverable under Section 147 of the Income Tax Ordinance, 2001.
Income from remunerative social media content will also have to be declared in a special section of the income tax return for each tax year.
The SROs authorize the relevant commissioner to rectify a return where declared income is lower than the amount calculated under the special procedure and recover the resulting tax liability under the Income Tax Ordinance.
The FBR defines a social media platform as an internet-based service whose primary purpose is to enable users to interact with other users and share user-generated content, with economic value arising from user participation, network effects and monetization of user engagement or user data.
Social media content includes digital information, communication or creative material generated or published by users where its value arises from user engagement, audience reach or platform-facilitated dissemination. The rules define “remunerative social media content” as social media content that derives remuneration in any form.
The notifications said provisions of the Income Tax Ordinance not specifically addressed by the special rules would continue to apply to persons earning income from remunerative social media content. The amendments were issued under Section 99C and relevant provisions of the Income Tax Ordinance, 2001.