In a significant development, Netflix is cooperating with French authorities after reports emerged on Tuesday that its offices in France and the Netherlands were raided as part of an ongoing investigation into alleged tax fraud and concealed employment practices.

In response to the reports, a Netflix spokesperson stated, “We are fully cooperating with the authorities in France, where Netflix is a key player in the local economy. We comply with tax laws and regulations in every country we operate.”

The investigation, spearheaded by France's National Financial Prosecutor’s Office and the Central Office for the Fight against Corruption and Financial and Tax Offenses, saw searches conducted at Netflix's French headquarters, located in Paris’s 9th arrondissement. This probe is part of a preliminary investigation launched in November 2022, following concerns about possible “aggravated tax fraud” and “concealed work in an organized gang.”

The French magazine Marianne, which first broke the news, reported that the investigation was prompted by a 2022 tax audit. The audit revealed discrepancies between Netflix’s declared profits for France from 2019 to 2020 and the revenues expected from its then seven million French subscribers. This raised suspicions that Netflix had employed tax optimization techniques to minimize its tax burden.

According to the magazine, Netflix Services France reported paying $1.06 million (€981,000) in taxes for the 2019-2020 fiscal year—an amount that seemed inconsistent with its subscriber base. However, it appears that Netflix’s French subsidiary has since shifted its approach. By 2022, its declared local revenue surged from $51.3 million (€47.1 million) in 2020 to a substantial $1.3 billion (€1.2 billion).

The ongoing investigation seeks to uncover how the alleged tax fraud was organized and carried out within the company. French newspaper Libération also revealed that simultaneous raids were conducted at Netflix’s European headquarters in the Netherlands, thanks to a joint effort between French and Dutch authorities.

This isn’t the first time a major multinational has faced scrutiny over tax practices in France. In 2022, McDonald’s reached a settlement of $1.36 billion (€1.25 billion) with French authorities to avoid criminal prosecution for alleged tax fraud spanning over a decade.

As the investigation into Netflix progresses, all eyes will be on how the streaming giant navigates this challenge, particularly in countries where it plays a key role in the digital economy.

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