The decade-old arrangement allowed Alphabet to enjoy an effective tax rate of just 6 per cent on its non-US profits last year
Reuters | Amsterdam/London February 19, 2016 Last Updated at 23:36 IST
Google moved euro 10.7 billion euros ($12 billion) through the Netherlands to Bermuda in 2014, as part of a structure which allows it to earn most of its foreign income tax free.
Accounts for Google Netherlands Holdings published on Thursday show the unit transferred almost all its revenue, mainly royalties from an Irish affiliate through which most non-US revenue is channelled, to a Bermuda-based, Irish-registered affiliate called Google Ireland Holdings.
The tax strategy is known to accountants as the “double Irish, Dutch Sandwich”. It allows Google, now part of holding company Alphabet Inc, to avoid triggering US income taxes or European withholding taxes on the funds, which represent the bulk of the group’s overseas profits.
A Google spokesman said the company follows the tax rules in all the countries where it operates. The decade-old arrangement allowed Alphabet to enjoy an effective tax rate of just 6 per cent on its non-US profits last year, around a quarter the average tax rate in its overseas markets. Bermuda charges companies no income tax.
Corporate tax avoidance has risen to the top of the political agenda in European in recent years and Google in particular has been under pressure for the low tax it pays on profits generated from sales in the continent.
Last week Google was called to testify to a UK parliamentary committee about a £130 million ($186 million) back tax bill, agreed with the British tax authority in January, that the Opposition Labour party described as “derisory”. The deal brought Google’s total British tax bill for 2005 to 2015 to around £200 million, whereas its UK revenue amounted to £24 billion.
Google Netherlands Holdings NV, which has no employees, had a Dutch tax bill of just euro 2.8 million, its accounts showed.