Google saved billions in taxes in 2015 through the use of a 'Dutch sandwich', a system of holding companies that allows the company to shift profits to Bermuda, where there is no corporate income tax, Bloomberg reports. The extent of the tax savings was disclosed in a filing by a Google subsidiary in the Netherlands with the Dutch Chamber of Commerce, reported first by local newspaper Het Financieele Dagblad.
The Dutch subsidiary, Google Netherlands Holdings BV, has no employees. It recorded around EUR 14.9 billion in revenue in 2015, most of which came from Google Ireland Limited, which collects most of Google’s international advertising revenues. The rest came from a Google subsidiary in Singapore that serves a similar role. It then paid out the money to Bermuda-based subsidiary Google Ireland Holdings Unlimited, which has the right to license Google’s intellectual property outside the US.
The construction, also know as a 'Double Irish', helped Google's parent Alphabet reduce its effective tax rate outside the US to 6.4 percent in 2015, according to the company's filings with the US SEC, Bloomberg reported. The amount shifted through the Dutch subsidiary last year was 40 percent more than in 2014. By channeling the revenues through foreign subsidiaries, Google was able to avoid the 35 percent corporate tax rate in the US, where it is headquartered.
A Google spokesperson said the company complies with tax laws in every country where it operates.
The Irish government closed the tax loophole that permitted 'Double Irish' tax arrangements in 2015. However, companies already using the structure are allowed to continue employing it until the end of 2020.
