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Is it possible to get away from double taxation?

Is it possible to get away from double taxation? іTax

In our article today we will try to found an answer for a popular question – how multinational companies of innovation technologies avoid a taxation? Also we will talk about one of the biggest international company nowadays.

This company started with з producing PC in 1998 and pocket music player with rigid disk in 2001, this company has been developed technologies what we used to use in our daily life. Not even creative and challenging character helped them to get a success but also clever way in questions with taxation.

Parliament proceeding on 2014 was announce that in period from 2009 to 2012 they could cover more than USD 44bn. Even do not pay attention that the general director said that they had any violations by their side.

With that this occasion was beginning of a lot revolts as in the USA as in other countries, where this company have has an essential profit and pay misery tax.

Fundamental in international taxation is based on such principle of “all income should be taxed only once.” In other words, the rules relating to international taxation should not only allow to avoid double taxation, but also to avoid double tax evasion.

After a short analysis of the tax structure of the International Company, we will open the scheme, due to which the company was able to withdraw from the double taxation of US $ 44 billion

The scheme of International Company is very simple.

Before entering the New York Stock Exchange in 1980, IC creates in Ireland subsidiaries: IC operation International, IC operations Europe and IC sales International

IC operation Internationals a company company established under the laws of Ireland, at the same time, the basic management of the company and control of it made from the United States. IC – officially registered company, which has no significant assets or operations leading

Under Irish law, the company is a resident of the country only in the case if its management and control is carried out from the territory of Ireland. This is the definition of tax resident companies in Ireland makes the company dummy ideal partner for companies in the US.

IC sales International well established in Ireland and enjoys the same benefits as defined by the legislation of Ireland and the United States in respect of tax resident companies. The Company does not have significant assets and had no activity until 2012, when 250 employees of the company IC Operations and Europe has not been transferred to work in the company.

IC is involved in activities with the unrelated company in China, which collect production and subsequent sale of products related companies, distributors in Europe and Asia. In most cases the goods are physically never pass through the territory of Ireland

If you compare the costs incurred in accordance with the terms of the agreement on cost-sharing in relation to the resulting ISI profits it can be concluded that the contract is not quite commercially fair. ISI received a disproportionately large profits in replacement payments under cost-sharing.

In Ireland, company filed a tax return public authorities, taking into account the profits derived from the country. Tax liabilities were ridiculous in comparison with the profits that the company has received. So, in 2010 the company paid taxes in the amount of approximately US $ 10 million, while the profit amounted to about 22 billion in 2011. The amount of taxes paid amounted to approximately US $ 7 million, while the profit amounted to 12 billion.

This structure success is mainly based on two “non-tax” principle. The first – profits earned by an Irish company can not be taxed in the United States, the country of residence for the parent company International Company Inc. The second – the profit received by the Irish company is not taxed in the countries where the company’s products sold to end customers.

IC successfully stole from taxation 44 billion US dollars in the period from 2009 to 2011.

Author: Olena Kutova
senior lawyer of the Finance Business Service company
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