Financial investigators have raided Netflix offices in France and the Netherlands as part of a preliminary investigation into tax evasion. According to a French judicial source, investigators specializing in corruption and financial crimes searched the company’s headquarters in Paris on Tuesday morning.
The Amsterdam office of the US streaming giant, which serves as the headquarters for Europe, the Middle East, and Africa, was simultaneously raided by Dutch authorities.
The PNF (French National Financial Prosecutor’s Office) is in charge of the Netflix tax investigation. The PNF is a specialized law enforcement agency in financial crimes. It is known for conducting high-risk investigations of economic crimes, often involving large international companies. It opened in November 2022.
When the investigation was made public last year, Netflix claimed it complied with the tax laws of all countries.
According to reports, Tuesday’s raids by financial investigators relate to allegations of “significant tax evasion and concealment of undeclared work.” The raids are also part of an investigation that will begin in November 2022. “French and Dutch authorities have been cooperating on this criminal case for many months,” the report continued.
Meanwhile, Netflix is also under investigation in France over its tax returns for 2019, 2020 and 2021. French media company La Lettre A reported that until 2021, Netflix’s French operations were structured so that all subscribers were contracted with a Dutch subsidiary. As a result, the company paid less than 1 million euros ($1.1 million at current rates) in taxes to Paris in 2019 and 2020.
Investigators and authorities are now trying to find out whether Netflix continues to make illegal attempts to minimize its reported profits and tax burden.
But experts noted that an investigation in France does not mean criminal charges and does not necessarily lead to a trial. It also turns out that big tech companies that offer online services and subscriptions across borders often get into trouble 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 (US$60.78 million). The tax covered the period from October 2015 to 2019 and was paid following a tax investigation by the Milan prosecutor’s office.
The Milan prosecutors said the investigation was triggered by the physical presence in Italy of a technological infrastructure that included 350 servers intended to generate revenue.
They argued that the cables and computer servers used by Netflix justified the payment of the tax. They also argued that Netflix should have paid the tax in Italy because it relies on its digital infrastructure to stream content to its 2 million users in the country. The payments include taxes, penalties and interest from October 2015 to 2019. The streaming service also set up an Italian legal entity in 2022 to determine its Italian tax liability based on subscriptions of Italian residents.
“We cooperated with the authorities throughout the investigation and, as we have always made clear, acted in full compliance with Italian and international tax law,” Netflix said in a statement.
