Google to stop using Bermuda tax scheme - International Investment

Google's parent company, Alphabet, has announced it will no longer use a licensing scheme that in 2018 moved $24.5bn through a Dutch holding company to a Bermuda subsidiary.

Filings seen by Reuters showed that in 2018 Google moved €21.8bn ($24.5bn) through its Dutch holding company to Bermuda, up from €19.9bn in 2017.

"A date of termination of the company's licensing activities has not yet been confirmed by senior leadership, however management expects that this termination will take place as of 31 December 2019 or during 2020," the filing with the Dutch chamber of commerce said.

We don’t stash money on some Caribbean island"

"Consequently, the company's turnover and associated expense base generated from licensing activities will discontinue as of this date."

Because Bermuda has no corporate income tax it was lucrative for Google to report income there, effectively delaying tax payment on international earnings to the US for years while paying a lower tax rate in Europe.

The structure, know as the 'Double Irish, Dutch sandwich', allowed Google to lower its effective corporate tax rate on non-US profits to about a quarter of the nominal average tax rate in its overseas markets.

Reuters said the filing did not give a definite end date but that Google management expected the termination to take place ‘as of 31 December 2019 or during 2020′.

This will simplify Google's tax arrangements in line with efforts by the Organisation for Economic Co-operation and Development to limit international tax avoidance, following changes to US and Irish tax law.

"In line with the OECD's BEPS conclusions and changes to US and Irish tax laws, we're now simplifying our corporate structure and will license our IP (intellectual property) from the US, not Bermuda," a spokesman for the company said in a statement to Reuters.

"Including all annual and one-time income taxes over the past ten years, our global effective tax rate has been over 23%, with more than 80% of that tax due in the US," the statement added.

The Netherlands does not currently tax royalties, but is planning to change this as part of a package of measures to crack down on tax evasion in 2021.

Google has always maintained that it pays all the taxes due wherever it operates.

Companies including Google, Cisco, Pfizer, Merck, Coca-Cola and Facebook all avoided a 35% US corporate tax rate, which has now been cut by Donald Trump.

"We don't depend on tax gimmicks," he added. "We don't stash money on some Caribbean island," Apple's CEO said.

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