Netflix International B.V.

…3 April 2023 Netflix welcomes the European Commission’s (EC) proposal to amend Directive 2006/112/EC as regards VAT rules for the digital age. With our ever-evolving business and localization of our business footprint, we deal with many different aspects of VAT within the European Union (EU). In that respect, tax certainty is crucial to run our business successfully. As an entertainment service, we have benefitted from other innovative VAT systems in the EU, like the EU One-Stop-Shop for electronically supplied services that we use to comply with VAT legislation in most of the EU Member States. With the increasing number of countries introducing Digital Reporting Requirements (DRR), we very much support the standardization and harmonization of these systems at a regional level.

Requirements (DRR), we very much support the standardization and harmonization of these systems at a regional level. Further, with the continuous modernisation of the digital economy, we welcome the single VAT registration proposal which will simplify VAT compliance for companies involved in intra-EU trade. We would like to take this opportunity to share our initial feedback and potential suggestions with regard to the proposal. Digital Reporting Requirements Netflix strongly encourages standardization and harmonization of the rules around e-invoicing and e-reporting. In addition, Netflix is always looking for ways to optimize and automate business processes and the current proposal by the EU very much supports this ambition.

…ways to optimize and automate business processes and the current proposal by the EU very much supports this ambition. While the current proposal takes a positive step in the direction of standardization, it still appears to provide room for a discretionary interpretation of the rules as Member States are only required to comply with a standard data format, but no guidance is known yet on how this will be implemented in e-reporting systems. We expect that this will lead to increased compliance efforts associated with the need for tailored solutions in the different Member States. We therefore would appreciate more detailed guidance from the EC, as well as full harmonization for both cross-border and domestic e-invoicing and reporting requirements. Our key recommendations in respect of Digital Reporting Requirements include:

…and reporting requirements. Our key recommendations in respect of Digital Reporting Requirements include: 1. Cost of compliance: with each Member State designing its own real-time reporting technology for cross-border supplies of goods and services, the fragmentation could drive up compliance costs for businesses. Further, Member States will still have the ability to implement local e-invoicing and 1 Ref. Ares(2023)2409353 - 03/04/2023 reporting requirements. We already see a wide variety of reporting and e-invoicing requirements across Member States that lead to the need to implement tailor-made solutions per Member State, and expect this fragmentation trend will continue in the coming years. Finally, the introduction of tailor-made solutions per Member States will result in dependencies from third party e-invoicing and e-reporting software providers and will drive up costs for…

…up costs for compliance, as companies will not be able to design, implement and maintain these solutions in-house. 2. Technological challenges in Member States: recent developments have shown that Member States are struggling to adjust their local technology to EU standards. The introduction of the OSS and IOSS in 2021 showed that Member States struggle to timely implement technology that translates EU legislation into domestic reporting solutions. We are concerned that the need for Member States to implement cross-border real-time reporting technology will lead to issues at the level of local tax authorities, resulting in delayed implementations, manual intervention or temporary fixes for Member States to comply. Netflix would support clear guidance from the EC when it comes to the functionalities of the technology that need to be implemented by the Member States.

…from the EC when it comes to the functionalities of the technology that need to be implemented by the Member States. In addition, we see value in strict data requirements to ensure that the data that Member States need for e-invoicing and reporting is consistent and companies are able to work with one clear set of data. E-invoicing and e-reporting deadlines We understand that in order to monitor cross-border transactions real-time, shorter deadlines are required for businesses to invoice and report transactions. In the current proposal, the e-invoice for a cross-border supply needs to be issued 2 days after the supply takes place. Currently, businesses have up to 45 days to issue invoices.

…needs to be issued 2 days after the supply takes place. Currently, businesses have up to 45 days to issue invoices. Changing this to a 2-day 1 deadline for e-invoicing, a 2-day deadline for reporting and removing the option to issue summary invoices, requires a considerable business change and finance processes drastically to comply with VAT legislation. This will be challenging to implement as we are dealing with approval processes and financial reporting processes that drive tax reporting timelines. Netflix would be in favor of an extension of the invoicing and reporting deadline to be in line with standard business processes.

…be in favor of an extension of the invoicing and reporting deadline to be in line with standard business processes. 1 Article 222 Directive 2006/112/EU 2 Single VAT Registration Netflix strongly encourages the move towards simplification of the VAT registration regime as it would reduce the compliance and administrative burden on companies who are involved in intra-EU supplies. From the proposal, we however understand that capital goods are excluded from the application of the single VAT registration regime. Although the proposal aims to reduce the compliance burden on stock-in-trade, businesses also need to move capital goods between member states to carry out their (taxable) businesses effectively. By not extending the scope of the simplification scheme to capital goods, the administrative and compliance burden still exists for many businesses.

…the simplification scheme to capital goods, the administrative and compliance burden still exists for many businesses. In addition, since Member States need to define the term ‘capital good’ (art. 189 VAT 2 Directive), different definitions are maintained by Member States, leading to legal uncertainty. We understand that one of the reasons to exclude capital goods was the lack of harmonization and subsequent complexities with the right to recover input VAT on capital goods, but in our view excluding capital goods without harmonizing the definition across the EU will actually lead to more uncertainty for businesses. Therefore, we would very much support that the proposal also include capital goods under the simplification scheme, especially in cases where the businesses have a full right to recover input VAT on costs. 2 Article 189 Directive 2006/112/EU 3

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