AMSTERDAM: Google parent Alphabet will no longer use an intellectual property licensing scheme, known as the “Double Irish, Dutch sandwich”, which allowed it to delay paying US taxes, 2018 tax filings show.
A Google spokesman yesterday confirmed it would scrap the licensing structure, saying this was in line with international rules and followed changes to US tax law in 2017.
Dutch filings showed that in 2018 Google moved 21.8 billion euros ($24.5bn) through its Dutch holding company to Bermuda, up from 19.9bn in 2017. Google said it would end the practice after 2019.
“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 Dutch filing said.
Google, like other multinationals that make use of international tax minimisation strategies, has always said it pays all its taxes. “We’re now simplifying our corporate structure and will license our IP (intellectual property) from the US, not Bermuda,” a spokesman said in a statement.
“Including all annual and one-time income taxes over the past 10 years, our global effective tax rate has been over 23 per cent, with more than 80pc of that tax due in the US.”
For more than a decade, Dutch, Irish and US tax law allowed Google to enjoy an effective tax rate in the single digits on its non-US profits, around a quarter the average tax rate in its overseas markets.
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.