The Milan tribunal opened the probe as the prosecutors believe Netflix has enough of a physical presence in Italy - including fiber optic cables and servers - to qualify as a local business that should be paying taxes, Reuters and Bloomberg reported, citing unnamed sources.
The Netflix tax probe was first reported by Italian newspaper Corriere della Sera.
Italy has been cracking down on multinational businesses to ensure they pay their fair share of tax. Gucci owner Kering agreed to pay €1.25 billion ($1.37 billion) in May to settle an investigation of the brand's tax payments from 2011 to 2017.
Meantime, Mastercard (MA) - Get Mastercard Incorporated Class A Report said on Wednesday that it was complying with a mandatory tax audit in Italy after reports of raids in its offices by the Italian financial police.
Other tech companies have also faced the wrath of Italy's tax authorities, including Amazon.com (AMZN) - Get Amazon.com, Inc. Report and Alphabet's Google (GOOGL) - Get Alphabet Inc. Class A Report , which have both settled separate investigations in recent years with payments totaling hundreds of millions of euros.
Shares of Netflix were down 4%, or $10.75 a share, in New York trading on Thursday.
- Impeachment Proceedings May Be Bullish for Facebook and Alphabet
- Consider Amazon While It's Under Attack in Washington, DC
Save 57% During Our Fall Sale. Join Jim Cramer's Action Alerts PLUS investment club to become a smarter investor. Click here to sign up and save!