In another blow to star of the Coalition's "digital economy" strategy, Netflix has decided to base its European HQ in Luxembourg, not "TechCity". Although Netflix is using the UK to spearhead its UK expansion - launching its video-on-demand streaming service here first next year - it will instead be “joining the many internet …
Silicon roundabout has it's points if you are a dev house with widely separated developers and little need for a full time office: it's cheap and there's lots of free advice and peers who are willing to share. LX has it's own set of issues, like CH revolving around legal problems, but the UK's insistence on being "greener than thou" and screwing all concerned on 'leccy prices will fuck up more "internet" companies than anything else :-(
That'll be a brass nameplate and a couple of beancounters to write invoices to each other, then.
VATs the way to do it.
This is simply down to the VAT rate. 15% in Luxembourg, 20% here. You can bill VAT at your local rate across the EU. As Netflix will want a harmonised euro price across the EU (eg 19.99). If they came here they would have to pay an extra 5% of their gross margin to the exchequer and also be at risk of currency fluctuations.
bill VAT at your local rate across the EU.
Only if you don't have a trading presence in the country you're selling to.
Order a book from amazon.co.uk when you live in France and you'll be billed French 5.5% VAT, not UK 0%, because it's treated like a purchase from amazon.fr.
It's 15% too much.
VAT - the last refuge of the bankrupt welfare state.
What I do know about Luxusbourg is that they have a nice housing bubble going, which is being strenuously denied by all people political. Also, banking problems...
The rules are different for products delivered electronically vs products delivered by courier.
If you buy a fondleslab from apple.com and you pay 20% UK VAT. If you then go to the iTunes store to buy some things to put on it, you pay 15% Luxembourg VAT.
"Revenues in the nine months to 30 September were $2.32bn with a gross profit of $864bn from making copyright material attractive. It achieved this without asking for the rules to be bent."
I'm sure that making $864bn profit from $2.32bn revenues is breaking the basic rules of accounting (or mathematics).
If I remember by basic economics, profit = revenues - expenses. So you would expect a going concern to have lower profits than revenues because the expenses are factored in (and ANY business is going to have costs involved in its operation--for the labor, at the least). So from this basic equation, for those same nine months, their basic business expenses ran about $1.45bn, and note that this is GROSS profit, which means additional overhead expenses (not directly related to generating the revenue) have yet to be factored in (in that case, you want to look at the NET profit).
Minimal red tape?
I set up a business in Luxembourg a few yeas ago. It took 8 1/2 months from starting the process to getting my business licence, most of which was spent trying to get the Ministry of the Middle Classes (translated but true) to find the papers they continually lost.
And having started a consultancy I was eventually the proud owner of a licence to buy and sell office furniture.
That'd be their low VAT rate then. I'm sure Luxembourg has some fine coders, but to misquote Mrs Merton: "What first attracted your business to the low-tax country of Luxembourg?"
rob1n beat me to it but...
gross profit of $864bn ?
Blind pontificating aside, are there any facts here...? No. OK...
Are they actually doing anything in luxemburg (ie employing developers) or is this a "brass plaque" company?
Surely this is like US companies being "based in" Delaware, even if all the employees are actually in Santa Clara (high tax, fwiw)
" It's proof that low taxes and minimal red tape matter the most, when location decisions are made."
Low taxes may be, but "double dutch sanfdwich" and the like make that moot, as fewer companies pay any tax anyway.
But do you have any evidence at all on "minimal red tape" ?
Probably not because as Anonymous says above it is completely untrue - according to the OECD the UK is significantly better (#10 in world as opposed to #23)
Still, why let a few facts get in the way of an amusing story?
Merkozy beat me to it:
In the absence of any useful work to do at the moment, I've been asked to keep an eye on some of the government's - i.e. your - cash being splooged over Shoreditch ATM.
This should be interesting. Know nothing as yet, however I am nothing if not open-minded.
AC, because they pay me for this.