Google parent Alphabet is changing its international tax structure to end the use of the controversial tax avoidance scheme 'Double Irish, Dutch sandwich', Reuters reports based on Dutch tax filings by the company for 2018. A Google spokesman confirmed it would scrap the licensing structure, saying this was in line with international rules and followed changes to US tax law in 2017.
The Dutch filings seen by Reuters showed that in 2018 Google moved EUR 21.8 billion through its Dutch holding company to Bermuda, up from EUR 19.9 billion in 2017. Google said it would end the practice from 31 December 2019 or during 2020, the filing said.
A spokesman said the licensing of intellectual property will go through the US, rather than Bermuda in future.
The subsidiary in the Netherlands was used to shift revenue from royalties earned outside the US to Google Ireland Holdings, an affiliate based in Bermuda, where companies pay no income tax. The tax strategy was legal and allowed Google to avoid triggering US income taxes or European withholding taxes on the funds, which represent the bulk of its overseas profits.
Under pressure from the EU and the US, Ireland in 2014 decided to phase out the arrangement, ending Google’s Irish tax advantages in 2020. The Netherlands will also implement a new withholding tax on dividends paid to low- or no-tax countries like Bermuda from 2021.
