In France, Netflix saw its turnover explode in 2021. However, the company still pays a meager tax to the tax authorities.
From a tax point of view, we can say that there is better on the side of Netflix, if we have to take stock of its activities carried out in 2021 in France. However, behind the efforts, there are still disproportionate data between what the firm of Reed Hastings actually earns in France, and what it pays in taxes on profits to the local tax authorities. Let’s get into the details.
A turnover finally exceeding one billion euros in France
This is obviously not enough yet, but Netflix is slowly returning to the ranks of what the French expect in terms of taxation: that is to say equality between all companies. For the year 2020, for example, the company had only deposited on its tax sheet 56 million euros in turnover for its streaming service. In 2021, it declared 1.2 billion (yes yes, you read “billion”) euros in revenue in France. But what explains such a discrepancy?
In 2020, when you took out a subscription to the service, the contract was managed by Netflix International BV, a Dutch entity. Since 2021, the French company Netflix Services France SAS has been in charge of it. Hence the explosion in turnover, with data transmitted by our colleagues from Capital. The real figure would even be 1.32 billion euros, with the update of the number of subscribers, which exceeded 10 million in the country.
Of course, there is still a catch. The turnover is a little more in line with reality now, but not the profits. In 2021, the French subsidiary of Netflix generated 22.3 million euros in operating profits. In terms of operating margin, we plunged to only 2%, against 20% before tax in the United States over the same period.
Low income taxes thanks to a nice tax optimization, of course, but Netflix honors several other charges
In the end, therefore, Netflix only paid 6.5 million euros in income tax on income generated in 2021. This is much more than for the year 2020 (728,033 euros in taxes) , but this remains derisory in view of the overall revenues of the Californian company in France. Second question you can ask yourself: is all this legal then, name of Zeus?
And the answer is ” yes », not without a well-controlled tax optimization. In fact, Netflix France donates 85% of its turnover to other group entities, such as the famous Dutch branch Netflix International BV. The French subsidiary is only a service distributor who pockets a distribution commission, which would be decided according to the principles of the OECD on transfer prices applied between companies from the same group. The Dutch subsidiary only works via a license agreement, which also reduces taxes.
But it was even worse before, since until 2019 all of Netflix’s international business passed through a company that was tax resident in the Cayman Islands, albeit based in the Netherlands. Since then, the firm’s non-US activities have been held by the parent company, in Los Gatos.
Well, Netflix pays much less tax on profits than it should, but the giant pays VAT on online services, up to 20%, which was able to bring in 240 million euros for the State. last year. Nor should we forget the 5.15% tax on its turnover offered to the National Cinema Center (CNC), to finance the 7e art and its actors, and the 200 million euros invested each year in European films and series, under the SMAD directive.
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