Punjab Revenue Authority (PRA) has sent official written notices to Google and Facebook for tax payments. The authority is asking the tech giants to pay their taxes for the advertisement services provided to the Pakistani online market.
An ordinance, issued by the government on 16 January 2013, enabled sales tax on online advertising. Such services were to be charged at 16 percent for all companies operating in Pakistan, including Facebook and Google.
For the purpose, PRA sent written notices to Mark Zuckerberg, in the USA, and Google Pakistan’s (google.com.pk) regional office at Arfa Karim Tower, Lahore.
PRA said that all companies offering online services in Pakistan, such as advertising, are bound to pay taxes to the local governments. It further explained that this is a common practise throughout the world. Facebook and Google are taxed in their home country, USA, as well as all countries where they offer such paid services.
It has been reported that both, Google and Facebook, are yet to register themselves with Pakistani tax authorities. The companies have been asked to register with the PRA within 7 working days and pay all applicable taxes as well.
It is a good step by the government. Online companies have been making money through Pakistani clients for ages and yet do not pay their taxes. Even local companies have had it easy up till now. May be this could be an indication that the government plans to start taking online taxation more seriously from now on.
Via C42
Punjab Revenue Authority (PRA): Mark sahib tax do
Mark Zuckerberg: LOLz
Suckerberg: Pehle apne PM se to lay lo tax.
Punjab Revenue board should consider reading its country’s laws first. A company (that is based in a country that has tax treaty with Pakistan) is only liable to tax in Pakistan if the parent company maintains a permanent establishment in Pakistan. In case of Facebook, it has no permanent establishment in Pakistan. As for Google, it is most likely that Google USA has an office in Pakistan, but Google Asia (a seperate identity of Google in Singapore, completely seperate from Google US) handles everything with Pakistan. So they are also not liable to tax in Pakistan.
Now you might think this is stupid for our government to have this rule, but this is how almost all countries have this (around 100+) major countries including all EU, NA, Pacific and so on. The reason for this is to avoid getting taxed in two countries. Just take an example into consideration. All Pakistani IT exports (valued at $2 billion+ last year by PASHA), are sold to countries like US, and all of EU mostly. So in this case, if those rules were not in place then all these companies would have to pay taxes in all of those countries and comply with tax laws of all those countries and have tax lawyers and accountants in all of those countries. See where this is going? Hope this clears it up for some of you. I really hate it that no one shares the technical details of these things and general public has no idea about any of the technical things. Anyway let me know if any of you have any questions.
P.s I can quote the exact paras and articles regarding this. But one Google search should show it to you. So be smart and find your own sources, instead of trusting some random dude named “AFK” :D
I am an ACCA aspirant with previous degree in law. My possibly incomplete or partially incorrect interpretation follows. A Paki company, with office in US/Canada, pays their taxes in full. A Paki company, with no physical presence in US, does not actually operate in the US/Canada with any business name. Either they use online portals like Odesk and pay taxes in garb of commission of the portal, or, get paid by direct clients and unlawfully avoid taxes. Any income generated from US territory is taxable, whether earner is citizen, or resident, or non-resident or whatever.
Facebook, Google etc operate inside Pakistan with registered subsidiaries directly owned by Alphabet(Google). They are not providing any contract/paid services here. They are merely selling products(ads) by exporting them to PK. These are liable to tax, just like Kohlers commercial generators are taxed here. Tax must be charged. I hope PRA hires competent lawyers should the case go to any international arbitration court.
Double taxation treaty with US, is not there as far as I know. Even if it is there, FB, GOO etc dont file explicit statements of earnings made from PK. So at least a tax investigation by US authorities is warranted. Till then, they should be taxed here in full. In case of tax treaty, one has to file tax statements in both countries to consolidate their taxes and get a relief from one of the two countries. Evidently, nothing of that sort is being done. And it is be to ascertained whether tax treaty scope is limited to income tax only, or other taxes like GST, service/professional tax etc as well. PRA is not seeking income tax from what I can see. They are looks for a tailored version of sales tax.
If Google is using their Asian subsidiaries to operate in PK, we certainly have no tax treaty with those registrar Asian countries. We can and should tax them.
Further reading with respect to India :
http://www.bloomberg.com/gadfly/articles/2016-06-01/india-s-google-tax-risks-opening-pandora-s-box
http://economictimes.indiatimes.com/news/economy/policy/modi-governments-new-way-to-tax-google-facebook-kicks-in-from-tomorrow/articleshow/52512712.cms
Money sent from outside the country via legal agents can not be taxed. So if a pakistani freelancer is making money from USA and receives cash in Pakistan, he is not liable to pay taxes here as money was sent from outside the country.
By the way if you wish to impose all those stupid hefty Pakistani taxes on companies like Facebook and Google, they will simply disable the advertising service for this country. You won’t be able to promote your products online using their platforms.
Asrar bhai one quick google search will show you Pakistan has DTA with US. Pretty much every decent country in the world has those with everyone. Like I said, Facebook has literally 0 presence. As for Google, I am 100% sure what they have done is Alphabet owns the subsidy in Pakistan, but ads and everything goes through Google Asia Ltd, which is a complete seperate legal and contracting identity then Alphabet in US. So Google Asia ltd has no presence in Pakistan. Before you hate on Google for this, this is how they give our app developers, adsense publishers and so on all payments completely tax free (that is, no tax connection with US as your contract company is Google Asia ltd if you are from Pakistan). So this way you are only liable for tax in Pakistan.
Also I have been talking to many CPA (certified public accountants) inside of US and I have done like 100 hours of research myself too, as I needed these for my own work. First of all, services provided are always taxed only in the country where they are provided. I know Google and FB are not providing a service but rather online products in the form of advertising portal. Anyway unless physical goods are involved, the company is not liable to any tax in US or Pakistan unless exactly the same company has permanent establishment there themself. Also usually US withholds a 30% tax, but if you are from a country with DTA with them, you can simply fill form W8-Ben and they will not withhold anything and you are only liable to taxes in your own country. So I hope this clears it for you.
Nonsense. If Dawn.com or Geo.tv have to pay tax on online ad revenue then why should google or Facebook be exempt. If Google and Facebook do business in Pakistan either directly or through agents they are liable to tax no matter what. In the USA like in Pakistan there is withholding tax that the withholding agent must pay. If the google FB do not operate directly either their ad receiving agent must pay this tax or the local customer.
This doesn’t require a law degree or a CA degree or ACCA degree. One only needs to read the finance bill.
USA and Pakistan have a double taxation treaty but this applies to income tax only not sales tax.
AFK you are talking crap sorry.
W8BEN once filled means that the withholding agent in the US will withhold 30 percent before remitting abroad. Only certain items such as capital gains on us securities are exempt everything else including dividends and All services including online are taxed.
Second not true that no good is exchanged so no tax. In the us goods online are now taxed and in Pakistan all online ads and services or goods were always taxed.
Sorry but 100s of hours of research wasted.
I’m talking crap? Mery jahil dost idhr aa k apny ap ko zalel krny seh pehly do lafz parh liya kro. Look up what form W8-Ben is. Its a form to claim Double Tax Treaty so the withholding agent can send you payment without having to withhold 30%. Lol you’re just hilarious, calling out on me like that and don’t even know what the form is, rofl!
Generally companies (some, not all) might withhold 30% on your payments (it all comes to how they have setup their legal entity in US). But if you are from a country that has a DTA with US (over 100 countries have, including Pakistan), you can completely eliminate that 30% withholding based on the terms of DTA between your country and US.
Whats even more interesting is that majority of the companies don’t even ask for this form and pay you without withholding of tax (amazon affiliate, adsense, google play, apple itunes, clickbank, peerfly and so on). But if some other company is asking to withhold, then you can simply provide the W-8BEN (or W-8BEN-E if you are a company, sole properieter or association of persons).
Next time calling bs on someone please take a minute to do some research so you don’t make a complete fool of yourself.
Taxation authorities don’t know there own laws. In accounting you can capitalize borrowing costs if you meet certain conditions. tax says we don’t allow it you need charge borrowing costs as expense. So in a tax return all capitalized borrowing costs ares expensed out so obliviously it creates a difference between your balance sheet and Profit and loss with your tax returns. You also give a reconciliation between the two. It is a normal practice.
One of my clients got a tax notice that you have incorrectly expensed out borrowing cost and that you your balance sheet shows at an asset. We literally could not stop laughing seeing the notice. And we replied laughing and quoting the section which says too expense out all borrowing costs for tax purposes,
Yes borrowing for direct business purposes (not your personal matters) is tax deductible. But I’m not sure if whole loan or only interest is tax deductible. As in most countries its only interest that can be deducted.
JIs mulk ka PM tax nh deta whan ab yh loh tax dein gy wah kiya kamal kiya hai Punjab Govt ny
Joke of the day !
Maza agya :D
BAAHHHHAAHAHHAAHAHAHAHAHAHAAHAHAAHAHAHAHAHAHAHHAHAH…. How cute pra “PRA”.. :D
Prawaa tax de deyo! :P
Stupid asses, already 10% withholding tax is paid on all payments sent out for these purposes.
And that 10% WHT renders their revenue under final tax regime i.e. Full and final taxation
The us government has not been able to charge apple, google or FB the taxes they should be paying whilst maintaining multiple campuses on US soil. PRA kia ukhaar laygi?
Haha bilkul sae kaha. Google Asia ltd (the one that deals with people in Pakistan and other Asian countries) is not owned by or directly related to Alphabet US. And only Alphabet US has presence in Pakistan. So Google Asia ltd has no presence in Pakistan. Good luck taxing them. And the whole asking facebook for tax is a complete joke (they have no tax liability in Pakistan whatsoever, even legally speaking).
Buddy you would know too there are literally articles on articles on these guy’s systematic tax evasion how they have left the law completely helpless even in the US & Europe. Hum kiss khait ki muli hain :p
Avoidance my friend, not invasion :)
Actually avoidance in most cases is not even unethical. This whole tax system is one of the worst forms of slavery. You work your life, and pay (if you are being totally complient with law and earn a lot of money) you will be paying 40-50% tax in US very easily. And where does your tax money go? *cough* afghanistan *cough* Vietnam *cough* wars
As for Pakistan, Allah he hafiz hy bhai. Pta nae kis trha mulk abi tk chl raha hy.
Hey Aamir from now on cut the salary of Aadil Shadman to pay taxes.
Not a bad idea :-)
Bhai agr already nae karty ho to apni tax return mein kaisy salary deduct kerty ho as expense? :D
Sales tax is charged from the clients, so they will just pass it to their clients. They won’t be paying any tax on the income generated through Pakistani market.
Anxious to know what Marks has to say about it; if he ever bothered to :-)
“The authority is asking the tech giants to pay their taxes for the advertisement services provided to the *Pakistani online market* “…
PRA- If it’s Punjab Revenue Authority, irrespective of whether it can or cannot tax google or facebook in Pakistan, it can only ask for taxes applicable on the advert services in “Punjabi Online Market” … not the whole “Pakistani Online Market”. Who authorised PRA to collect taxes on behalf of other provinces..
Here is the reason that has awakened our authorities http://mashable.com/2016/06/01/india-google-tax