French and Dutch authorities raided Netflix’s offices in Paris and Amsterdam on Tuesday as part of a tax fraud investigation, 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 an investigation opened in November 2022, the source said.
Netflix’s Amsterdam headquarters for Europe, the Middle East, and Africa was also searched by a joint team of French and Dutch officials.
“French and Dutch authorities have been cooperating on this criminal case for many months,” the source said.
Netflix is under investigation in France for its tax filings for 2019, 2020, and 2021.
The company did not immediately respond to AFP’s request for comment on Tuesday.
Netflix stated last year that it complies with tax laws in all countries where it operates, following media reports about the investigations.
The French outlet La Lettre A reported that until 2021, Netflix’s French operation was structured so that all subscribers were signed up through a Dutch subsidiary, which allegedly minimised its tax bill.
This left Netflix paying less than one million euros ($1.1 million at current rates) in taxes to France in 2019 and 2020, despite having around seven million French subscribers.
Authorities are now investigating whether Netflix continued to use illegal strategies to reduce its reported profits and, consequently, its tax obligations, La Lettre A added.
The French subsidiary reported very low operating margins compared to its US parent company in 2021 and 2022, paying just 6.5 million euros in taxes on its 2022 profits.
However, the practice of billing a significant share of revenue to entities outside France constitutes a “tax optimisation strategy that is legal” under certain conditions, according to La Lettre A.
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 company launched in France just over 10 years ago and now has 10 million households subscribed.
Netflix asserts that it adheres to local laws on commissioning French content, pays the full rate of VAT, and contributes to a film industry levy.
In 2023, the company said it invested 250 million euros in producing French content, including 50 million euros for feature films.
Its popular French productions include the “Lupin” series starring Omar Sy, a modern reimagining of Maurice Leblanc’s classic stories of “gentleman thief” Arsène Lupin—France’s answer to Britain’s Sherlock Holmes. The show broke into Netflix’s top 10 most-watched shows in 70 countries, according to the platform.
