March 3, 2021

Netflix will tax its income in Spain and opens the door for other multinationals to imitate it




The growing obligations to technology and new business models may be starting to pay off. The Netflix subsidiary in Spain has confirmed to ABC on Tuesday that as of January 1 of next year it plans to make a change in its distribution model and recognize the income it generates in Spain in the country where its economic activity takes place.

This measure responds to the evolution of its activity and its commitment to the country. «We are an integral part of the audiovisual ecosystem in Spain. Our contribution in 2019 has been key to carry out productions in various autonomous communities; to generate thousands of jobs and boost the sector. We have a long-term commitment to Spanish creation and we are firmly committed to developing a sector that is as diverse as possible. We are proud to be able to position Spanish talent as a world reference, “Netflix sources tell this newspaper, confirming the news advanced by” Cinco Días “.

Google rate lurking

Until now, Netflix and HBO declared less income together in Spain than the national Filmin: if the first said to invoice 538,921 euros, the second collected sales of 1,707 million. The sum of both is less than the 2,529,485 euros declared by the Spanish Filmin. The restructuring of Netflix will also take place in other European countries, since right now its continental headquarters, where all revenues are directed, is located in the Netherlands.

The movement comes at a time when Spain will begin to apply the rate for digital services, the Google rate, in January 2021. It is not the only country with plans to pass a similar tax: India, Austria, Brazil, the Czech Republic, the United Kingdom, France and Italy also have similar plans. In fact, the Donald Trump Administration threatened these countries with tariffs and the question is what his successor, Joe Biden, will do now.

The EU versus the OECD

In addition, within the own resources in the framework of the Multiannual Financial Framework and the European Reconstruction Plan, the Commission plans to approve a European Google rate by 2023 at the latest. However, the OECD has delayed in mid-2021 the plan to reach an agreement for a global Google rate and the Commission itself has already indicated that if there was no agreement, it would accelerate the project of a continental tax next year. This scenario seems to be approaching.

Directives with new obligations

To this are added the new obligations imposed by the Audiovisual Communication directive, which Spain will soon transpose, by having the preliminary draft of the branch in public hearing. Video on demand services and internet audiovisual content platforms must allocate 5% of their turnover in Spain to finance European works (films and series), as private television channels already do, which will cause Netflix, HBO , Disney + or the corresponding branch of YouTube have to allocate this percentage of their income in our country for this purpose. These revenues will not be declared, but the CNMC will collect the information for this purpose, so these companies will have to provide more data.

Likewise, the platforms must meet other conditions such as that 30% of the catalog is of European work. In the case of those that operate from our country, of this percentage, 50% will at least include productions in official languages ​​of Spain. In the case of platforms based in other European countries, It will be these member states that must transpose the directive in their legal systems and ensure that they comply with the requirement of 30% of the catalog, for example.

To this is added that Netflix has a good part of its series production increasingly based in Spain. From “The paper house” to “Cable girls” or films like “The hole”, the catalog shot in our country is growing.

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