Google Pays 2.4% Taxes on Overseas Profits

How much are you paying on your overseas taxes? Or do you even have overseas taxes? Well, if your name is Google then you’re only paying 2.4% on the profits you generate outside the country.

For the record, the U.S. corporate tax rate is 35%.

One analyst thinks that if Google followed the normal rules the stock would be $100 lower. Mind you, Google isn’t doing anything illegal, at least not as the laws now stand. Also, there are plenty more companies doing the exact same thing.

These companies use a complicated maneuver where they send their taxes through Ireland to a tax-haven island. This is known at the “Double Irish.” Google uses Bermuda after a stop in the Netherlands. From 2007 to 2009, Google saved $3.1 billion.

This Bermuda-managed entity is owned by a pair of Google subsidiaries that list as their directors two attorneys and a manager at Conyers Dill & Pearman, a Hamilton, Bermuda law firm.

Tax planners call such an arrangement a Double Irish because it relies on two Irish companies. One pays royalties to use intellectual property, generating expenses that reduce Irish taxable income. The second collects the royalties in a tax haven like Bermuda, avoiding Irish taxes.

To steer clear of an Irish withholding tax, payments from Google’s Dublin unit don’t go directly to Bermuda. A brief detour to the Netherlands avoids that liability, because Irish tax law exempts certain royalties to companies in other EU- member nations. The fees first go to a Dutch unit, Google Netherlands Holdings B.V., which pays out about 99.8 percent of what it collects to the Bermuda entity, company filings show. The Amsterdam-based subsidiary lists no employees.

At least no one can be laid off.

Posted by on October 21st, 2010 at 11:55 am


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