The Indian government is considering imposing a tax on the income earned by Netflix from its streaming services within the country, according to media reports.
This marks a significant development as it would be the first instance of overseas digital companies being subjected to taxation in the country for their provision of electronic commerce service.
The tax authorities have attributed an income of about Rs 55 crore ($6.73 million) to Netflix's Indian permanent establishment (PE) in the assessment year 2021-22, according to a draft order, the media reports stated.
The US-based entertainment company is deemed to have a PE in India, requiring its income in the country to be taxed.
As per the tax authorities, Netflix was temporarily assigned in India to enhance its streaming services, leading to a PE and tax liability here. In the past, tax authorities have ruled that seconded employees, including those on short-term loans, are deemed to form a permanent establishment.
This move is a part of India's efforts to regulate the digital economy and ensure that foreign companies are taxed on the revenue they earn in the country. The Indian government has been deliberating the implementation of a digital tax and this move against Netflix could serve as a precedent for taxing other foreign digital companies in the future, as per media reports.
Netflix introduced its streaming services in India in 2016 and presently has more than six million subscribers.