Netflix Japan evaded 1.2 billion yen in tax, and will be pursued for additional taxes of about 300 million yen

According to media reports, the Tokyo Regional Taxation Bureau investigated the Tokyo-based unit of video streaming giant Netflix and subsequently found that it underreported its income.

It is understood that Netflix Japan did not declare taxable income of 1.2 billion yen in the three years ending in 2019, which is about 63.1 million yuan.

Based on its profits, the company owes more tax than it actually pays, authorities said.

Japan’s tax authorities are expected to levy about 300 million yen in additional taxes on Netflix, including understated amounts. Netflix Japan has purchased streaming content rights from various production companies.

The company then sold the rights to its Dutch-based subsidiary, and the Dutch company made a disproportionately large profit from the deals, according to the sources.

The Japan Tax Agency determined that although the Japanese branch received the benefits from the streaming rights, they did not receive a corresponding profit distribution.

An official at Netflix Japan said the company revised its tax return after internal discussions under Japanese tax laws.

At present, the number of Netflix users worldwide has risen to more than 200 million, and 5 million in Japan.