Twitter is the latest major internet multinational to have opened up a Spanish subsidiary. But the popular micro-blogging site has followed in the footsteps of Google, Apple, Facebook and Linkedin, all of whom keep their Spanish corporate taxes down to the bare minimum by shifting their income to Ireland.
Created on February 27, 2013, Twitter Spain ended its first fiscal year on December 31 with income of just under €1 million and net profits of €46,772.50 according to the accounts it recently filed with the Madrid Business Register. These accounts also reflect the money that companies provision in a given year for tax on profits, which in Twitter Spain’s case is €26,067.
Twitter Spain has been set up as a company that does not invoice clients directly. This means that its income of €983,331 came not from Spanish clients, but from payments made by other units within the Twitter group. Its activities are limited to marketing, business development, market reports, promotional work and sales support.
Authorities in developed countries have been observing these tactics with growing concern
While Twitter Spain is not generating significant business volume yet, the company has already been set up in such a way that it will never pay much in corporate tax – even if its advertising revenues should suddenly balloon.
Its capital is wholly owned by Twitter International Company, based in Dublin. The Twitter group has two other Irish companies and a Dutch subsidiary, all of which allow Twitter to legally shift profits from countries such as Spain to tax havens, under a system known as the “Dutch sandwich,” in which a company in the Netherlands acts as a stop point between two Irish companies to reduce tax liabilities to a bare minimum.
The group’s filings with the US Securities Exchange Commission (SEC) do not break income down by countries. This year, Twitter hopes to earn around $1.3 billion (around €1 billion) and is expecting strong international growth. In the second quarter of 2014, nearly a third of Twitter’s income came from outside the United States. Its main foreign market is Britain.
But Twitter is no exception. Google, Apple, Amazon, Facebook, Yahoo, eBay and Microsoft use similar tax avoidance schemes. Authorities in developed countries have been observing these tactics with growing concern, and are trying to combat what is known as base erosion and profit shifting (BEPS). The OECD and the G-20 have launched plans to try to close the legal loopholes that allow these practices to go on unimpeded.