Italian authorities launch tax probe into Netflix

The Milan Public Prosecutor has opened an investigation into possible tax avoidance by Netflix in Italy, according to press reports.

According to Il Corriere della Sera, chief prosecutor Francesco Greco has charged deputy Gaetano Ruta with investigating Netflix’s tax affairs, even though the company does not have a physical presence in the country in the form of offices or personnel.

According to the paper, the Guardia di Finanza of Milan is carrying out the investigation on the basis that Netflix content is distrubted across the country by networks that are managed by service providers that are paid by the SVOD giant, and that Netflix has exclusive use of servers and computers that process the content and algorithms that deliver the Netflix user experience and profile the service’s users. Il Corriere della Sera cites the investigators’ view that the physical infrastructure used by Netflix implies that it has a physical infrastructure in the country, in which the streamer has an estimated 1.4 million customers.

Reuters has also reported the probe, citing an unnamed source that confirmed the Corriere report.

News of the Italian investigation comes as The Guardian reports that the UK government handed back €57,000 to Netflix last year in the form of a tax rebate, despite it making an estimated £700 million from its subscription business in the UK market, citing data from Ampere Analysis.

Netflix’s own UK financial filing records revenues of €48 million and pretax profits of €2.3 million because subscription fees are paid via its European HQ in the Netherlands.

Netflix’s tax relief stems from its investment in UK production. The company recently took leases on the bulk of Shepperton Studios under a 10-year deal.