Netflix accused of using Netherlands to avoid its tax bill

Streaming media giant Netflix was accused of using the Netherlands as a major part of a tax haven scheme to reduce its income tax liabilities globally. A report released this week by Tax Watch UK said Netflix moved between $327 and $430 million into tax havens in 2018, out of its total global profits that year of $1.2 billion.

About 4 million euros were paid in tax to the Netherlands for 2018 activities, where the company uses three different Dutch BV corporations to shift money, the report stated. No tax was paid to the Netherlands the year prior.

The report’s authors said that Netflix International Holdings BV earned a 151 million euro profit in 2018, but kept the profit margin at just 2.7 percent by making payments of 4 billion euros to “other group companies.

“It is clear from the facts that we have been able to establish that Netflix has a tax structure which is typical of many digital companies we have studied,” the report said. “Sales are made from outside the UK, even though there is a substantial UK presence. This offshore sales hub is located in a jurisdiction with a strong treaty network (the Netherlands). The sales hub makes a very low profit margin as large costs are paid to related companies.”

The BV was also owned by Netflix Global Holdings CV, though it is not clear if that company is a Dutch commanditaire vennootschap, a type of limited partnership. Suriname also allows the CV business formation, as do countries within the Kingdom of the Netherlands, like Aruba.

A Netflix spokesperson told Deadline that the CV was a Caribbean entity that has since been retired as the company streamlined its corporate structure. “Corporate taxation is an important and much-debated issue. Ultimately, it’s for governments to decide the rules when it comes to tax — and in every country in which we operate, Netflix respects those rules,” the spokesperson said.

In the near future it could be much harder for Netflix to avoid paying tax in the Netherlands by shifting profits from Dutch entities to cover losses reported in other countries. By 2021, the government could force multinationals like Shell, Philips and Akzo Nobel to pay tens of millions of euros in corporate income tax. The three firms paid next to nothing, if anything at all, according to broadcast reports.

The Tax Watch UK report was also critical of the media company taking advantage of national production credits for British made shows like The Crown and Sex Education, but then paying little on the profit derived from those shows.

Netflix countered that, telling Deadline that tax relief programs allowed it to invest a half-billion dollars in a slate of British programs last year. The company claims it generated 20 thousand jobs and apprenticeships in doing so.

In the Netherlands, Shell also used an argument that it was ethical to avoid paying income tax in the Netherlands on billions of euros of profits because of the high volume of jobs it created, the related wage taxes paid, as well as the excise and sales taxes it delivered.