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French and Dutch authorities raided streaming giant Netflix’s offices in Paris and Amsterdam on Tuesday as part of a tax fraud inquiry, a judicial source told AFP.
The search of “various locations” in France by specialist financial investigators relates to suspicions of “covering up serious tax fraud and off-the-books work” and is part of a probe opened in November 2022, the source said.
Netflix’s Amsterdam headquarters for Europe, the Middle East and Africa was also targeted for a search by a team of officials from both France and the Netherlands.
“French and Dutch authorities have been cooperating on this criminal case for many months,” the source said.
Dutch prosecutors confirmed the searches “in the context of a French legal assistance request”, while the European Union agency for Criminal Justice Cooperation (Eurojust) said it was “supporting the investigations” including Tuesday’s searches.
Netflix is under investigation in France for its tax filings for 2019, 2020 and 2021.
“We are cooperating with the authorities in France, where Netflix is a major contributor to the local economy, and we respect all the laws and tax rules in all the countries where we operate,” a Netflix France spokesman told AFP.
French outlet La Lettre A had reported that Netflix’s French operation was structured until 2021 so that all subscribers signed up with a Dutch subsidiary — thereby “minimising its tax bill”.
That left it paying less than one million euros ($1.1 million at today’s rates) in taxes to Paris across 2019 and 2020, when it had around seven million French subscribers.
Authorities are now trying to determine whether Netflix kept up illegal attempts to minimise its reported profits and thereby its tax bill, La Lettre A added.
The French subsidiary reported very low operating margins compared to the US mothership in 2021 and 2022, the outlet said, paying just 6.5 million euros in tax on its profits in 2022.
But its practice of billing a large share of revenue to entities outside France represents a “tax optimisation strategy that is legal” under certain conditions, La Lettre A added.
– Streaming success –
Netflix earned over $9.8 billion in revenue worldwide from its 282 million subscribers in July-September this year, with net profit reaching $2.4 billion.
The group arrived in France just over 10 years ago and now boasts 10 million households subscribed.
Netflix says it conforms with local laws on commissioning French content, paying the full rate of VAT and contributing to a film industry levy.