Income tax hits Netflix, Rs 196 crore case reaches court

Income Tax And Netflix: You and I may enjoy new shows on Netflix every week, but the Income Tax Department of the country has to recover Rs 196 crore from OTT platform company Netflix. The Income Tax Department also sent a notice to the company for this, but now the matter is about to reach the Income Tax Tribunal. This means that whether Netflix will pay tax or not will be decided in the court.

The Income Tax Department had demanded tax of Rs 196 crore from Netflix in an alleged tax evasion case. This tax demand was generated by the International Wing of the Income Tax Department. Later, both the parties also went to the Dispute Resolution Panel (DRP) where earlier this year the decision came in favor of the Income Tax Department.

Netflix earnings and tax accounting

Netflix Entertainment Services LLP has been registered in India. It is a dependent agent permanent establishment of Netflix, that is, as a permanent establishment (PE), Netflix has to share the income from operations in India with its parent company.

Now the Income Tax Department says that between April 2020 and December 2020, Netflix earned about Rs 1,145 crore from India operations, while its profit was Rs 1,008 crore. The share of the Indian operation in this came to Rs 503 crore. But as a PE arrangement, Netflix offered Rs 13.36 crore in India, transferred the remaining Rs 490 crore to Netflix, but according to Indian law this amount is taxable and Rs 196 crore was taxed on it. Tax of Rs.

Netflix went to court

A Netflix spokesperson said in a statement that the company fully follows its global requirements and tax rules. The officer said that he has decided to challenge the decision of the DRP. The company may soon approach the Income Tax Appellate Tribunal regarding this matter.