Dutch and French tax investigators carried out parallel house searches at Netflix on Tuesday. They investigate suspicions of tax evasion, and in France also suspected money laundering and illegal work.
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This is reported by the French media, citing unnamed judicial employees, and the Dutch media, citing the public prosecutor there. Netflix denies the allegations and emphasizes that it adheres to all tax laws. In Italy, Netflix reached an agreement with the local tax authority two years ago and paid 55.8 million euros. Last week, officials from the South Korean tax authority paid a visit to Netflix’s branch there. South Korea has already punished Netflix for tax evasion, which Netflix has appealed.
At the heart of the conflict is the fundamental question of where international corporations should and are allowed to record their profits. In the case of Netflix, things are complicated by the fact that it buys the rights to films and series centrally for several countries. It sometimes produces the titles itself and often films in several countries. The company then makes the result available to subscribers in numerous other countries. This opens up room for interpretation as to which sales from one country should be offset against costs in other countries, especially since Netflix does not rent individual titles, but charges flat subscription fees for the entire portfolio and generates additional advertising revenue. Computer games are also part of the offer.
Amsterdam hub
Amsterdam is Netflix’s headquarters for Europe, the Middle East and Africa. Approximately half of all global subscription revenue is accounted for through this branch. However, the company forwards over 90 percent of this to its affiliates in other countries, which the Dutch tax office does not take lightly.
In the 2023 financial year, Netflix’s global tax rate was 12.9 percent, or not quite $800 million. The Netherlands has introduced a minimum tax on global profits of 15 percent, but this will only apply to US companies from 2026. Nevertheless, the tax investigators want to know now whether everything has been done correctly so far.
Netflix also recorded French subscription fees through Amsterdam until 2020, which the French tax office did not agree to. In 2021, Netflix reported French subscriptions in France for the first time. This means that French sales exploded from a good 47 million euros in 2020 to 1.2 billion euros in 2021, knows the Huffington Post. Nevertheless, tax investigators suspect that Netflix France may have continued to use abusive methods to reduce its tax burden.
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