Thu, Jan 04, 2018 - Page 10 News List

Google saved on taxes via Bermuda shell company

Bloomberg

Alphabet Inc’s Google in 2016 moved 15.9 billion euros (US$19.2 billion) to a Bermuda shell company, regulatory filings in the Netherlands show — saving the company billions of US dollars in taxes that year.

Google uses two structures, known as a “Double Irish” and a “Dutch Sandwich,” to shield the majority of its international profits from taxation. The setup involves shifting revenue from one Irish subsidiary to a Dutch company with no employees, and then on to a Bermuda mailbox owned by another Ireland-registered company.

The amount of money Google moved through this tax structure in 2016 was 7 percent higher than the year before, according to company filings with the Dutch Chamber of Commerce dated Dec. 22 and which were made available online on Tuesday.

News of the filings was first reported by the Dutch newspaper Het Financieele Dagblad.

“We pay all of the taxes due and comply with the tax laws in every country we operate in around the world,” a Google spokesman said in a statement. “We remain committed to helping grow the online ecosystem.”

Google is under pressure from regulators and authorities around the world for not paying enough tax. Last year, the company escaped a 1.12 billion euro French tax bill after a court ruled its Irish subsidiary, which collects revenue for ads the company sells in France, had no permanent base in the country.

The EU has been exploring ways to make US technology companies, many of which use similar tax shelters, pay more.

The Irish government in 2015 closed the tax loophole that permitted “Double Irish” tax arrangements, but companies already using the structure are allowed to continue employing it until the end of 2020.

According to US financial filings, Google’s global effective tax rate in 2016 was 19.3 percent, which it achieved in part by shifting the majority of its international profit to the Bermuda-based entity. Applying that tax rate, Google would have saved US$3.7 billion via the 2016 transfer.

Google held US$60.7 billion overseas at the end of 2016 on which it had not yet paid US income taxes or “foreign withholding taxes,” the company said in a filing with the US Securities and Exchange Commission.

For years, US tax law has given US companies an incentive to keep their foreign earnings offshore by allowing them to defer US taxes until they return those profits to the US.

However, that changes this year; the US tax law passed last month will require companies to pay taxes on the overseas income they have stockpiled to date at one of two rates: 15.5 percent for income held as cash or cash equivalents and 8 percent for less liquid assets.

Going forward, US companies that pay relatively low global effective tax rates — a sign that they are using tax havens — would pay a minimum US tax. That new tax, which begins at a rate of 10.5 percent, would not apply in cases where a company’s global effective tax rate is 13.125 percent or higher.

Google Ireland Ltd collects most of the company’s international advertising revenue and then passes this money on to Dutch subsidiary Google Netherlands Holdings BV.

A Google subsidiary in Singapore that collects most of the company’s revenue in the Asia-Pacific region does the same.

The Dutch company then transfers this money on to Google Ireland Holdings Unlimited, which has the right to license the search giant’s intellectual property outside the US. That company is based in Bermuda, which has no corporate income tax.

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