Mumbai (India), 12th May 2023: According to people familiar with the situation, India is attempting to tax Netflix Inc.’s income from streaming services in the nation. It is the first attempt to tax foreign digital enterprises that provide electronic commerce services to Indian consumers.
The income tax authorities determined that the US-based entertainment company has a permanent establishment (PE) in India and hence is subject to taxation on its income in the country.
According to a draught order, the tax authorities ascribed around Rs 55 crore income to Netflix’s Indian PE in the assessment year 2021-22. The tax officials reasoned that Netflix had certain infrastructure and workers on secondment from the parent firm in India to provide its streaming services, resulting in a PE and tax liability in the country. Netflix did not respond to requests for comment.
Tax authorities have previously ruled that the presence of seconded employees, those loaned for a limited time, established a permanent establishment of the foreign company in India.
India generated the most net subscriber additions internationally in 2022, owing to the December 2021 debut of an aggressive pricing plan backed by a slate of Indian originals and licenced films.
According to an EY media analysis, India is the world’s largest market in terms of time spent on over-the-top (OTT) services. According to experts, subscription earnings for India’s OTT sector would reach $3 billion by 2024.
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