Taxability of remunerative social media content on YouTube

General

Any person, whether resident in Pakistan or otherwise, being individual or an association of person or a company can engage in remunerative use of media content through various platforms.

The most frequently used platform is YouTube. This platform is run by a US entity. Anyone placing content on the YouTube is given a remuneration by the YouTube on certain bases which is usually the number of views which for technical terms is the ‘watch time’. We understand that YouTube withholds US tax up to 24 percent, unless the recipient files US tax return.

The Relevant Law

The income from remunerative social Media content is taxable in Pakistan in the hands of residents under the general law.

For non-residents specific amendments were made in the Income Tax Ordinance, 2001 to bring such income as Pakistan source income under Section 101(3B) of the Ordinance by the Finance Act, 2024.

Definition of Income from Remunerative Social Media under the Rules

This income is the remuneration in whatsoever form from the “Social media content” (SMC). SMC means any digital information, communication, or creative material generated or published by a user on a social media platform, the value of which arises from user engagement, audience reach, or platform­facilitated dissemination, including content capable of generating advertising, sponsorship, or other monetization revenue.

The New Procedure in Pakistan

Through SRO 545 and 546(I)/2026 dated April 1, 2026 Federal Board of Revenue has prescribed the special procedure for payment of tax on remunerative media contents

Under these SROs both non-residents and resident persons have been taxed on income from such activity and the basis of taxation for both is the same.

Taxable Threshold

A person is taxable only if there are more than 50,000 users of a content in a tax year or 12,250 during a quarter. The quantity of users will be determined with respect to each video on the platform (YouTube).

Normal Taxation and Minimum Tax

The revenue for determining such income will be the sum actually received. However, it cannot be less than Rs 195 per 1000 users.

A deduction for expenses equal to 30% of the revenue shall be allowed. The net income will be taxable at the rate prescribed under the law.

There is no withholding required. Tax is to be paid along with the return or as advance tax.

Taxability for Non-Residents and Treaty

A person being a resident of a country that has an Agreement for Avoidance of Double Taxation with Pakistan can only be taxed on such income under Article 7 as ‘Business Income’ under the OECD Model treaty.

Under Article 7, a business income can only be taxed if it is attributed to the Permanent Establishment of that non-resident person in Pakistan.

SRO 545 which relates to non-resident has treated the said income as Pakistan source income under Section 101(3B) of the Income Tax Ordinance, 2001 within the meaning of significant economic presence, which has been treated as a part of business connection for attributing a source of income to Pakistan.

The term Permanent Establishment includes virtual business presence as per clause (bb) of Sub-section (44) of Section (2) of the Income tax Ordinance. From the treaty viewpoint, it would have to be established that the person using YouTube, which is viewed in Pakistan is a business income of that person in Pakistan and that person, in case of a non-resident, maintains a PE in Pakistan.

The more important part of this analysis would be that for the purposes of determining the PE the relevant law will not be the provision of Section 2(44) as referred above but the definition of the PE as contained in the treaty.

We are not aware of any treaty where any amendment or addition to this effect has been made in the OECD Model. This would effectively mean that there will be no taxability in the case of a person who is a tax resident of a country, with whom Pakistan has signed a tax treaty.

Better to Pay Tax in Pakistan

Since there is withholding by US at the rate of 24 percent therefore for all practical purposes it would be advisable for residents and non-resident persons that the tax as prescribed in the SROs be paid in Pakistan without invoking the exemption under the treaty even if it is considered applicable.

We are of the view that if such a tax is paid in Pakistan then US tax authorities will oblige YouTube for not withholding tax at the rate of 24 percent and the concerned person could pay tax on the world income after taking the credit for taxes paid in Pakistan.

Copyright Business Recorder, 2026