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Netflix’s French subsidiary targeted by tax audit

Until 2021, Netflix minimized its taxation by declaring its French turnover in the Netherlands. The years 2019, 2020 and 2021 are affected.

By NJ with AFP

The French subsidiary of Netflix is ​​the subject of a tax audit.

LThe French tax authorities are interested in Netflix accounts. The American streaming giant has been the subject, since 2022, of a tax audit covering the 2019, 2020 and 2021 financial years of its French subsidiary, according to information from Letter A, confirmed by AFP this Wednesday, August 30.

“We comply with the tax rules of all the countries in which we operate around the world,” responded a spokesperson for the group, which arrived in France in 2014. “At the same time, we support a reform of the international tax system in order to provide a clear framework for companies operating in an increasingly digitalized world.”

A “legal tax optimization practice”

Until 2021, Netflix “minimized its taxation by declaring in the Netherlands its turnover generated in France”, its customers contracting with a Dutch company, writes Letter A. “Between 2019 and 2020, Netflix Services France”, which already claimed 7 million subscribers in France, thus paid “only 981,000 euros in taxes on profits”.

After the abandonment of this financial arrangement in 2021, the turnover declared in France by Netflix jumped from 47.1 million euros in 2020 to 1.2 billion euros, then to “1.3 billion euros”. ‘euros in 2022’, when the bar of 10 million French subscribers was crossed.

Looking at the 2021 financial year, “tax officials intend to check whether […] Netflix has not continued to abusively minimize its profits,” explains Letter A. It cites in particular the gap between the “microscopic operating margin”, of less than 2%, generated in France by the platform in 2021, and that of its American parent company, by 20%, ensuring that “this gap persisted in 2022”, a year in which the company “paid only 6.5 million euros in profits”.

“By re-invoicing a large part of its turnover to other Netflix entities abroad”, the firm is engaging in “a practice of legal tax optimization” under certain conditions, explains Letter A. In the event of abuse, Bercy could decide on a recovery, as has been the case in recent years for other digital giants, including Google.

READ ALSO“Badly born”, without future: Salto, the failure of “French Netflix” For its part, Netflix ensures that it complies with French regulations by complying with investment obligations in creation, by paying full-rate VAT as well as the contribution to the CNC of 5.15% of its turnover.

With more than 238 million subscribers worldwide, Netflix earned $8.2 billion in revenue in the second quarter of 2023.

Contacted, the General Directorate of Public Finances (DGFiP) did not comment.

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