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Tax-free Irish Google unit paid $50bn in dividends

Tax-free Irish Google unit paid $50bn in dividends

An Irish arm of Google has paid dividends of $50.8bn (€45.3bn) over the past two years, ahead of it losing the benefits of the so-called ‘double Irish’ tax scheme.

The latest accounts show its profits were entirely tax-free in 2018.

During 2019, dividends of $27.9bn were paid by Google Ireland Holdings Unlimited (GIHU) to the company’s immediate parent. In 2018, it paid a $22.9bn dividend.

That was up from $2.7bn during 2017.

Accounts just filed with the Companies Registration Office in Dublin by GIHU show its tax bill in 2018 was zero, despite reporting a profit for the year of $15.5bn.

GIHU is an Irish-incorporated but Bermuda-domiciled company, a controversial low-tax structure based on a loophole in Irish tax rules that will shut this year, and which has been dubbed the ‘double Irish with a Dutch sandwich’.

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The scheme had allowed the business and other multinationals to slash their corporate tax bills to zero outside the US, and to delay paying American taxes by routing profits through a complex structure of holding companies in Ireland, the Netherlands and Bermuda.

Under rules announced in 2015 that come fully into force this year, Irish companies must also be tax-resident here.

GIHU is a parent to dozens of companies and businesses, including Google Ireland Limited, and is in turn a subsidiary of Google Bermuda Limited.

Ultimately, all of the companies in the group are owned by Alphabet Inc, a US multinational.

Changing global tax rules, including the phasing out of the double Irish scheme and a massive US tax cut in 2017, have prompted a raft of internal reorganisations within multinationals.

These have involved re-domiciling the intellectual property (IP) rights that are key to how profits are classified and accounted.

The domicile of intangible assets – including intellectual property – is key to where multinationals pay tax.

GIHU’s latest results show that in October 2019, it received what it described as a distribution of intangible assets from subsidiary undertakings and passed them on to its immediate parent – a Bermuda-based subsidiary of US-domiciled Alphabet.

The accounts also stated that in future, Google Ireland Holdings Unlimited would no longer continue licensing intellectual property or holding debt securities, but it would continue equity investment operations.

The scale of money involved and the number of countries where Google generates profits mean the next move will be closely monitored.

In Ireland, the global reorganisation of IP has been linked to the surge in corporate tax paid here since 2015.

Whether the higher Irish tax bills are an interim effect, or will be a long-term result of the changes, remains unclear, however.

A filing by Google’s parent company, Alphabet, in the Netherlands confirmed it will no longer use the double Irish with a Dutch sandwich model from this year.

A spokesperson said its IP would shift to the US, which implies that royalty payments that are key to Google’s profits will flow back to the home country.

“We’re now simplifying our corporate structure and will licence our IP (intellectual property) from the US, not Bermuda,” the spokesperson told Reuters.

“Including all annual and one-time income taxes over the past 10 years, our global effective tax rate has been over 23pc, with more than 80pc of that tax due in the US,” the spokesperson added.

Under the double Irish with a Dutch sandwich scheme, companies had been able to defer paying American tax on global profits, as long as the money was not brought home, while the massive 2017 tax cut in the US means multinationals have less of an incentive to pile up cash offshore.

“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 December 31, 2019, or during 2020,” the Dutch filing stated.

Ireland is an important operational base for Google, as well as part of its tax structure. The company employs more than 8,000 people in Dublin.