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Joshua Fagbemi
Guest
Financial investigators have searched Netflix’s offices in France and the Netherlands as part of a preliminary investigation into tax fraud. According to a French Judicial source, investigators who specialize in corruption and financial crimes raided the company’s central office in Paris on Tuesday morning.
The U.S. streaming giant’s office in Amsterdam, which serves as its headquarters for Europe, the Middle East, and Africa was also simultaneously searched by Dutch officials.
In charge of Netflix’s tax probe is the PNF (French National Financial Prosecutor’s Office). PNF is a special financial crime prosecution unit notorious for pursuing high-stakes white-collar probes that often involve large international companies, and was opened in November 2022.
When the probe went public last year, Netflix insisted that it complies with tax law in all countries.
According to a report, Tuesday’s search by specialist financial investigators relates to suspicions of “covering up serious tax fraud and off-the-books work”. The search is also part of a probe opened in November 2022. “French and Dutch authorities have been cooperating on this criminal case for many months,” the report added.
Meanwhile, Netflix is also under investigation in France for its tax filings for 2019, 2020, and 2021.
La Lettre A, a French outlet, reported that Netflix’s French operation was structured until 2021 in a way that all subscribers signed up with a Dutch subsidiary. This left the company to pay less than one million euros ($1.1 million at today’s rates) in taxes to Paris across 2019 and 2020.
Both investigators and authorities are now trying to determine whether Netflix kept up illegal attempts to minimize its reported profits and tax bill.
However, experts pointed out that a preliminary investigation in France does not imply criminal charges and does not necessarily lead to a trial. It is also found that large tech companies offering their online services and subscriptions across borders often run into difficulties with European tax authorities.
In 2022, Netflix agreed to settle a tax dispute with Italy by paying 55.8 million euros ($60.78 million). The tax which covered the period of October 2015 to 2019 was paid following a tax probe investigation by Milan prosecutors.
Prosecutors in Milan said the investigation was triggered by the physical presence of technological infrastructure in Italy, including 350 servers aimed at producing revenue.
They argued that cables and computer servers that were used by Netflix warrant tax payments. They also claimed Netflix should have paid taxes in Italy because it relied on digital infrastructure to stream content to 2 million users in the country.
The payment covers taxes, penalties, and interest from October 2015 through 2019. The streaming service also established an Italian legal entity in 2022, which will determine its Italian tax burden based on subscriptions to Italian residents.
“We cooperated with the authorities throughout this investigation and, as we have always made clear, we acted in full compliance with Italian and international tax law,’’ Netflix said in a statement.
Netflix acquired 5.1 million new subscribers during the third quarter of 2024. The movie-streaming company surpassed Wall Street’s projected 4 million subscribers for the period. The number is also below the 8.76 million it acquired within the same period a year ago.
Shows that headlined the performance table on the movie streaming platform during the period include The Murder Mystery, The Perfect Couple, and Nobody Wants This. According to the company, customer growth is expected to skyrocket when the Korean Drama “Squid Game” returns in December.
Squid Game
The company also reported that its ad-supported service delivered more than 50% of signups during the third quarter. Netflix has been trying to shift investor attention from sign-ups to metrics such as profit margins and revenue growth. The company plans to stop reporting subscriber data from next year, leaving to focus on ad-supported plans for more growth.
During the quarter, Netflix earned $5.40 per share which was above the analyst forecast of $5.12. It is also 22% higher than it traded a year earlier (Q3, 2023). It also reported an operating margin of 30% and its revenue rose to $9.825 billion, a bit ahead of the $9.769 billion that was projected.
Read More: Netflix acquires 5.1 million subscribers in Q3 2024, targets more in Q4.
The post Netflix offices in Paris and Amsterdam raided amid tax fraud investigation first appeared on Technext.
The U.S. streaming giant’s office in Amsterdam, which serves as its headquarters for Europe, the Middle East, and Africa was also simultaneously searched by Dutch officials.
In charge of Netflix’s tax probe is the PNF (French National Financial Prosecutor’s Office). PNF is a special financial crime prosecution unit notorious for pursuing high-stakes white-collar probes that often involve large international companies, and was opened in November 2022.
When the probe went public last year, Netflix insisted that it complies with tax law in all countries.
According to a report, Tuesday’s search by specialist financial investigators relates to suspicions of “covering up serious tax fraud and off-the-books work”. The search is also part of a probe opened in November 2022. “French and Dutch authorities have been cooperating on this criminal case for many months,” the report added.
Meanwhile, Netflix is also under investigation in France for its tax filings for 2019, 2020, and 2021.
La Lettre A, a French outlet, reported that Netflix’s French operation was structured until 2021 in a way that all subscribers signed up with a Dutch subsidiary. This left the company to pay less than one million euros ($1.1 million at today’s rates) in taxes to Paris across 2019 and 2020.
Both investigators and authorities are now trying to determine whether Netflix kept up illegal attempts to minimize its reported profits and tax bill.
However, experts pointed out that a preliminary investigation in France does not imply criminal charges and does not necessarily lead to a trial. It is also found that large tech companies offering their online services and subscriptions across borders often run into difficulties with European tax authorities.
Netflix’s Tax Dispute and Settlement in Italy
In 2022, Netflix agreed to settle a tax dispute with Italy by paying 55.8 million euros ($60.78 million). The tax which covered the period of October 2015 to 2019 was paid following a tax probe investigation by Milan prosecutors.
Prosecutors in Milan said the investigation was triggered by the physical presence of technological infrastructure in Italy, including 350 servers aimed at producing revenue.
They argued that cables and computer servers that were used by Netflix warrant tax payments. They also claimed Netflix should have paid taxes in Italy because it relied on digital infrastructure to stream content to 2 million users in the country.
The payment covers taxes, penalties, and interest from October 2015 through 2019. The streaming service also established an Italian legal entity in 2022, which will determine its Italian tax burden based on subscriptions to Italian residents.
“We cooperated with the authorities throughout this investigation and, as we have always made clear, we acted in full compliance with Italian and international tax law,’’ Netflix said in a statement.
Netflix’s Growth Amidst Tax Dispute
Netflix acquired 5.1 million new subscribers during the third quarter of 2024. The movie-streaming company surpassed Wall Street’s projected 4 million subscribers for the period. The number is also below the 8.76 million it acquired within the same period a year ago.
Shows that headlined the performance table on the movie streaming platform during the period include The Murder Mystery, The Perfect Couple, and Nobody Wants This. According to the company, customer growth is expected to skyrocket when the Korean Drama “Squid Game” returns in December.
Squid Game
The company also reported that its ad-supported service delivered more than 50% of signups during the third quarter. Netflix has been trying to shift investor attention from sign-ups to metrics such as profit margins and revenue growth. The company plans to stop reporting subscriber data from next year, leaving to focus on ad-supported plans for more growth.
During the quarter, Netflix earned $5.40 per share which was above the analyst forecast of $5.12. It is also 22% higher than it traded a year earlier (Q3, 2023). It also reported an operating margin of 30% and its revenue rose to $9.825 billion, a bit ahead of the $9.769 billion that was projected.
Read More: Netflix acquires 5.1 million subscribers in Q3 2024, targets more in Q4.
The post Netflix offices in Paris and Amsterdam raided amid tax fraud investigation first appeared on Technext.