India is seeking to tax Netflix’s income on the income generated by its operations in the country.
Has foothold in country
The American-based company has a permanent establishment in the country, and this is liable for tax on its income generated here.
If this happens, it will be the first of its kind move where an overseas digital company will be taxed for providing electronic commerce services to consumers here.
The company has its employees and infrastructure from the parent company’s secondment in India to support its streaming services.
This leads to a permanent establishment and tax liability in the country.
First of its kind move
In a draft order, the 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 U.S. 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.
Presence in India
According to Tofler, gross revenue for Netflix Entertainment Services India at the end of FY21 was Rs 1,529.36 crore.
Netflix started its operations in India in 2016 and currently has 6 million subscribers in the country.
Recently, it saw an increase of around 30% in engagement in India after a large price cut on subscription tiers in the first quarter of 2023.
Price cut following India success
It followed by lowering pricing in an additional 116 countries in Q1 after observing its success in India.
During Q1 2023, the firm reported $8.16 billion in revenue, falling short of what the market anticipated.
However, the business posted Q1 earnings of $2.88 per share, which were greater than anticipated.
To remove password sharing
Netflix stated, “For Q2 2023, we forecast revenue of $8.2 billion, 3 per cent a year.”
Before June 2023, according to Netflix, it plans to push out its choices for compensated password sharing within the current quarter.
