IT Department Said to Be Considering Tax on Netflix’s India Operations: All Details

The government is seeking to tax Netflix’s income earned from streaming services in the country, the Economic Times reported on Friday, citing people familiar with the matter.

In a draft order, income tax authorities attributed an income of about 550 million rupees ($6.73 million) to Netflix’s Indian permanent establishment (PE) in the assessment year 2021-22, the report added.

Tax officials reasoned that the US firm had some employees and infrastructure from the parent entity on secondment in India to support its streaming services, leading to a PE and tax liability, the publication reported.

The move is the first time India will tax overseas digital companies providing electronic commerce services to consumers, the people told to ET.

Netflix did not respond to a Reuters’ request for comment.

Last month, Netflix beat Wall Street earnings estimates for the first quarter but offered a lighter-than-expected forecast, demonstrating the challenges the mature streaming service faces in its pursuit of growth.

The company said it shifted a wider launch of a plan to crack down on unsanctioned password sharing into the second quarter to make improvements, delaying some financial benefits, but said it was pleased with the results so far.

As the streaming video pioneer faces signs of market saturation, it is looking for new ways to make money, such as the password crackdown and a new ad-supported service.

Revenue and earnings for the first quarter came in roughly in line with the average analyst estimates from Refinitiv. Earnings per share hit $2.88 (roughly Rs. 200) with revenue of $8.162 billion (roughly Rs. 67,000 crores).

“We are growing and we are profitable,” Co-Chief Executive Ted Sarandos said in the company’s post-earnings video interview at the time. “We have a clear path to accelerate growth in both revenue and profit, and we’re executing it.” 

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