The Netflix logo is prominently displayed on the Netflix, Inc. building located on Sunset Boulevard in Los Angeles, California. AFP
French and Dutch authorities conducted a raid on Netflix's offices in Paris and Amsterdam on Tuesday as part of a tax fraud investigation, according to a judicial source. The search at "various locations" in France by financial investigators is linked to suspicions of "covering up serious tax fraud and off-the-books work" and is part of a probe initiated in November 2022. Netflix's Amsterdam headquarters, which oversees Europe, the Middle East, and Africa, was also targeted by a joint team of officials from France and the Netherlands.
"French and Dutch authorities have been collaborating on this criminal case for several months," the source stated. Netflix is currently under investigation in France for its tax filings from 2019 to 2021. The company did not respond immediately to AFP's request for comment on Tuesday. Last year, Netflix asserted that it adheres to tax laws in all countries where it operates, following the disclosure of these investigations in a media report.
French publication La Lettre A reported that until 2021, Netflix's French operations were structured such that all subscribers were registered with a Dutch subsidiary, thereby "minimizing its tax burden." This arrangement resulted in Netflix paying less than one million euros in taxes to Paris for 2019 and 2020, despite having approximately seven million French subscribers. Authorities are now examining whether Netflix continued to engage in illegal efforts to minimize its reported profits and tax obligations, according to La Lettre A.
The French subsidiary reported significantly lower operating margins compared to the US parent company in 2021 and 2022, paying only 6.5 million euros in taxes on its profits in 2022. However, the practice of billing a substantial portion of revenue to entities outside France was deemed a "tax optimization strategy that is legal" under certain conditions, La Lettre A noted.
Netflix generated over $9.8 billion in global revenue from its 282 million subscribers during the July-September period this year, with net profit reaching $2.4 billion. The company entered the French market over a decade ago and now has 10 million households subscribed. Netflix claims compliance with local laws regarding the commissioning of French content, paying the full rate of VAT, and contributing to a film industry levy. In 2023, the company invested 250 million euros in producing French content, with 50 million allocated to feature films.
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