Google moved €15.9bn to a Bermuda shell company in 2016, saving at least $3.7bn (€3bn) in US taxes that year, regulatory filings in the Netherlands show, writes Jeremy Kahn.
Google uses two structures, ‘the 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% higher than the year before, according to new company filings with the Dutch Chamber of Commerce.
Google is under pressure from regulators around the world for not paying enough tax.
Last year, the company escaped a €1.12bn 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 tech companies pay more.
The Government here closed the tax loophole that permitted the double Irish tax arrangement in 2015 but companies can use it to the end of 2020. The total pool of foreign earnings Google was holding overseas, free from US taxation, was $60.7bn at the end of 2016.
The US tax law passed last month would give companies an incentive to repatriate much of that cash by offering them a one-time, 15.5% tax rate. Foreign earnings would then be taxed at 10.5%, although companies can deduct foreign tax liabilities.
The law will also impose a 13.1% tax on certain patent royalties that could hit Google’s tax arrangement in which its Bermuda-based subsidiary licenses its intellectual property to its other foreign subsidiaries.
Google Ireland Ltd collects most of the company’s international advertising revenue and then passes this money on to the Dutch subsidiary, Google Netherlands Holdings. A Google subsidiary in Singapore that collects most of the 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 tax.