Streaming giant Netflix paid £3.2 million ($4.37 million) in U.K. corporation tax in 2019, accounts filed with the country’s Companies House has revealed.
Netflix has three companies listed in the U.K. – Netflix Services U.K., Netflix Studios U.K., and Netflix Productions U.K. – and they reported revenues of £120 million ($164 million) and declared pre-tax profits of £13 million ($17.76 million) in 2019.
The news was first reported by The Guardian.
Research firm Ampere Analysis estimates that Netflix earned £940 million ($1.28 billion) in subscription fees in 2019. The streamer has some 13 million subscribers in the U.K.
From this year, Netflix will begin paying tax in the U.K. on revenue generated locally, the company revealed last year.
The streamer had hitherto channeled its revenues through the Netherlands, a lower tax jurisdiction and the site of its European headquarters.
“As Netflix continues to grow in the U.K. and in other international markets, we want our corporate structure to reflect this footprint,” a company spokesman had said in 2020. “So from next year, revenue generated in the U.K. will be recognized in the U.K., and we will pay corporate income tax accordingly.”
Netflix is investing heavily in U.K. production, with the budget ballooning to $1 billion. The streamer’s highly successful U.K.-produced shows include “The Crown” and “Sex Education,” which are globally popular.
The tax numbers come at a time when the Organization for Economic Cooperation and Development (OECD), an intergovernmental group, is in the process of considering proposals to reduce tax avoidance by multinational companies. The proposals are being debated under two pillar blueprints. Pillar 1 looks at amending tax rules so that companies would pay taxes in countries based on the number of customers and Pillar 2 proposes a global minimum tax. The proposals are expected to get to national government decision making stages by mid-2021. The companies most likely to be affected by the changes are digital businesses with global footprints, including streamers like Netflix.
“Corporation tax is an important and much-debated issue. We support the OECD’s proposed reforms, but ultimately it’s for governments to decide the rules on tax – and in every country in which we operate, including the U.K., Netflix complies with those rules,” a Netflix spokesperson told Variety.
Netflix’s investment in the U.K. has been primarily in content and this is one of the reasons why the company’s tax liability has been low – Netflix only pays tax on profit, not revenues. Over the past five years Netflix has reinvested around 50% of revenues back into production in the U.K. Netflix’s U.K. team has continued to grow, from 29 permanent staff in 2018, to more than 260 in 2020. The company has invested in a long term lease on office space in central London.
“We are proud to be increasing our investment in the U.K.’s creative industries – spending over $1billion in the U.K. on new, locally-made films, series and documentaries in 2020 alone, helping to create thousands of jobs and showcasing British storytelling and culture to the world,” the Netflix spokesperson added. “We pay all taxes required and are committed to playing an active role in supporting British production and creative talent for the long term.”
Netflix’s increased subscription rates for the U.K. came into effect earlier this month.
The streamer’s standard plan increased from £8.99 ($12.22) to £9.99 ($13.58) and the premium tier from £11.99 ($16.30) to £13.99 ($19.02) monthly. The basic plan remains at the same price of £5.99 ($8.14).
The U.K. is now under its third coronavirus-induced lockdown. SVOD services grew 42% in 2020, according to recent figures compiled by the British Association for Screen Entertainment.