Foreign television and radio channels, having no landing rights in Pakistan, have to pay 15 percent sales tax on advertisements booked in Pakistan through their local agents. The Federal Board of Revenue has amended the Sales Tax Special Procedures Rules, 2007 through a notification here on Thursday.
Sources told Business Recorder that the FBR has not levied any new sales tax on excise duty on advertisements shown by television and radio. However, the "taxable services" pertaining to advertisement on radio or television has been clarified to the foreign media through the new amendment.
It has been clarified that the 15 percent sales tax would be applicable under Provincial Ordinance on the following categories: Advertisements broadcast or telecast by TV or radio stations based in Pakistan and advertisements booked in Pakistan for broadcasting or telecasting on TV or radio stations based abroad, whether or not possessing landing rights in Pakistan.
Secondly, 15 percent excise duty in VAT mode would be applicable on advertisements transmitted on closed circuit TV or cable TV networks. Explaining the rationale of clarification, sources said that some of the foreign based-channels demanded exemption of sales tax on Pakistani advertisements.
They have taken the plea that they have no office or landing rights in Pakistan. However, they are showing advertisements booked from Pakistani agents. Therefore, no tax should be charged on advertisements booked through some regional office in Pakistan, foreign-based channels argued.
Through the amendment, the FBR has clarified that the foreign channel definitely have booked their advertisements from some sub-office or agent. This authorised agent has to get registered with the tax department and pay the due amount of sales tax on the advertisements shown on foreign channels based abroad.
Despite the fact that foreign channel has no landing rights in Pakistan, they have hired agents for booking of Pakistani advertisements liable to 15 percent sales tax.
Sources said that 15 percent excise duty in VAT mode would be applicable on advertisements transmitted on closed circuit TV or cable TV network. Clarifying the amendment, sources said that excise duty would be applicable on the advertisements as well as slides shown on cable television networks. Under this head, the collection of excise duty is nominal as levy is not being paid on the advertisements and slides shown on cable television.
In the previous rules of advertisements on television and radio, the term taxable services means the broadcasting or telecasting of any advertisement on radio or television.
Now, the scope of tax on advertisement has been clarified by providing meaning of the expression "taxable services" of advertising. The scope covers all advertisements which are broadcast or telecast by TV or radio stations based in Pakistan; booked in Pakistan for broadcasting or telecasting on TV or radio stations based abroad, whether or not possessing landing rights in Pakistan; and transmitted on closed circuit TV or cable TV network.