Google vows to not use ‘Double Irish Dutch Sandwiches’ after 2019

Alphabet, Google’s parent company, will stop using an intellectual property licensing scheme called the “Double Irish Dutch sandwich’ as of 2020. The scheme allowed the tech giant to delay paying taxes in the U.S.

Changes made in tax law and international regulations have caused the company to rescind its use of this licensing structure, according to a Google spokesman. Sources claim that in 2018, Google transferred $24.5 billion to Bermuda from a Dutch holding company. The previous year, the figure had been $19.9 billion.

However, Google has firmly stated that this activity is to discontinue after 2019.

Google Uses International Tax Minimization Strategies

Several multinational companies use strategies to minimize tax payments in an attempt to increase growth. Google has not been any different in this regard. The company has asserted that regardless of using tax minimization strategies, Google has paid all due taxes responsibly.

The Dutch record of the transfer mentions that while senior officials have not yet given a hardcore date for the discontinuation of the licensing practice, according to statements, Google has already stopped using the strategy as of December 31st or it will sometime in early 2020.

Google’s spokesman also highlighted that since the company was working on a simpler corporate structure, all licensing activities would commence from the US and not Bermuda. The company added that globally it had been paying 23% of its revenue in taxes, and 80% of this amount was due and paid in the US.

U.S. law has given Google considerable leverage in the past by limiting its tax rate to remain in single digits for all profits generated overseas. Dutch and Irish tax legislation allowed the same. This is approximately 25% of what Google pays as taxes in other countries.

Google’s Affiliated Company Is In Bermuda Where It Is Not Liable To Pay Income Tax

Google used the Dutch subsidiary to transfer non-US profits to Google Ireland Holdings. The affiliated company is in Bermuda where Google is not liable to pay any income tax. The move is legal and not frowned upon, common for many multinational companies.

Accordingly, Google was able to save income tax from the U.S. and withholding tax from Europe, as these amounts are significant when it comes to the profit the company earns abroad.

In 2014, Ireland discontinued the deal because of pressure from the U.S. government and the European Union. Hence, Google will now be paying U.S. taxes and fees without any exemptions from 2020.

However, President Trump’s Tax Cuts and Job Acts gives Google the immunity it requires. According to the act, companies that earn profits abroad and have paid taxes in these countries do not need to pay taxes again in the U.S. This eliminates the need for foreign companies to employ these strategies to save tax money.