US streaming giant Netflix subject of tax probe in France, Netherlands

The European headquarters of United States online streaming giant Netflix have been raided as part of an investigation into alleged tax fraud.

Officials from France and the Netherlands searched the company's offices in Paris and Amsterdam on Tuesday, French judicial sources have said.

The two nations have been cooperating on the case since November 2022, when they opened a preliminary investigation coordinated by Eurojust, the European Union agency responsible for overseeing criminal justice probes involving member nations.

Reuters quoted a Netflix spokesman as saying: "We are cooperating with the authorities in France, where Netflix is a significant contributor to the local economy, and we comply with the tax laws and regulations in all the countries in which we operate."

France's National Financial Prosecutor, or PNF, which specializes in probing alleged high-profile white-collar crimes, suspects Netflix of "covering up serious tax fraud and off-the-books work", Reuters quoted a judicial source as saying.

The Financial Times newspaper said the joint French-Dutch probe is looking into alleged "aggravated tax fraud laundering" and also alleged "infractions of labor law".

Investigators from both the PNF and France's Central Office against Corruption and Financial and Tax Crimes took part in the Paris raid and are also scrutinizing the company's tax returns for 2019, 2020, and 2021.

The daily investigative online French newspaper La Lettre said the authorities believe Netflix may have minimized its tax payments in France before 2021 by declaring income generated there in the Netherlands.

Netflix's Amsterdam office is the company's European headquarters and also oversees operations in the Middle East and Africa.

La Lettre said the company abandoned the practice by 2021, and its official annual turnover in France shot up, from 47.1 million euros ($51.3 million) in 2020 to 1.2 billion in 2021.

Investigators are also reportedly looking into claims that, after 2021, Netflix established a French subsidiary that began paying a fee to the company's headquarters in the Netherlands, for the right to provide streaming services in France.

Netflix, which has been operating in France since 2014, now has more than 10 million subscribers in the country, the AFP news agency has reported.

French prosecutors are understood to be looking at other major multinational companies operating in France for alleged practices that mean they declare profits made there in other nations, where tax rates are lower.

The United States fast-food company McDonald's was the subject of a similar investigation that concluded in 2022 with it paying a 1.25-billion-euro fine, in a deal with French prosecutors that meant the company avoided a criminal prosecution.

Even though Netflix is the subject of a preliminary investigation, the company has not been charged with an offense and the probe could end without further legal action.