New Delhi: India, the world’s largest market in terms of time spent on over-the-top (OTT) services, is seeking to tax the revenue generated by Netflix in the country.
The tax authority’s draft decree supported their claims by stating that the US-based entertainment company has now established a permanent establishment (PE) and thus its income will be taxable in the country.
The tax authority has earmarked about 55 million rupees ($6.73 million) in revenue for Netflix’s permanent establishment (PE) in India between 2021 and 2022, the Economic Times reports.
The reason Netflix is taxed
The authorities supported taxing Netflix on the grounds that the company has some infrastructure and parent company employees in India, leading to a permanent establishment (PE) and therefore has to pay taxes in the country. However, Netflix did not respond to questions from the Economic Times.
This is the first time India has taxed any foreign digital company that provides e-commerce services to customers.
Why is India doing this?
With this, India not only regulates the digital economy but also ensures that foreign companies pay taxes on their profits from the country.
The Indian government has also been looking into introducing a digital tax for quite some time, and this action against Netflix can be seen as a test of future taxation for other foreign digital companies.