Facebook Spain and Twitter Spain, the Spanish branches of the two social networking websites, declare just a minimal part of the business they generate in the local market as revenue. As many other technology and internet companies do, they take advantage of their businesses’ lack of a physical location and bill for services from Ireland, a country with a much more favorable tax regime, while at the same time maintaining a small structure in Spain. According to the companies’ accounts, both firms saw revenues of just €7 million in Spain in 2014.
Both companies have seen rises in the amount of revenue they declare in the country, but this continues to be at minimum levels compared to the volume of business they actually generate in the Spanish market. Their revenues are billed to other companies in the same group for support and marketing services performed by their Spanish affiliates.
Facebook Spain saw turnover of €3.9 million in 2014, compared to €2.7 million the year before
Facebook Spain saw turnover of €3.9 million in 2014, compared to €2.7 million the year before. Its operating income grew 49%, to €295,850, while its net profit grew 48%, to €206,296. The company paid €84,114 of taxes on its profits, according to the accounts approved by the group’s headquarters in California in May of this year.
Tech firms that bill from Ireland barely pay any taxes in that country either, given that the companies have structures in place that allow them to divert their profits. An investigation by US Congress revealed that one of the main companies that make up Apple was essentially stateless from a fiscal point of view: it paid no tax in the United States because its registered office was in Ireland, and it did not pay tax in Ireland because its physical address was in the US.
According to data from tech website Techcrunch, Facebook has 18 million active monthly users in Spain
The figures for Facebook are in direct contrast to all estimates of the revenues it creates in the Spanish market. According to data from tech website Techcrunch, Facebook has 18 million active monthly users in Spain and the average income per user for the company in Europe is around €9 a year – which would mean real revenues of more than €150 million.
In reality, all the income from the Spanish affiliate is billed as sales and marketing support and services to Facebook Ireland Limited, and it is this company that bills the real revenues of the group in the Spanish market. Revenues from Facebook Spain simply cover personnel costs, advertising and rents.
It’s the same situation with Twitter Spain. The Spanish affiliate of the microblogging site tripled its business in Spain in 2014, passing from €983,000 to €3.09 million. It also saw its operating income triple to €235,000, and its net profit go up to €147,066, according to the company’s accounts, which were approved in June by Twitter International Company in Ireland. Twitter Spain paid €81,535 on taxes on profits.
The European Union has spent years trying to close these legal loopholes in order to make these firms pay their taxes. The European Commission is trying to rectify legislation covering the relationships between parent companies and subsidiaries, which was originally conceived to avoid situations of double taxation for companies operating in different member states, rather than as a means for multinationals to avoid paying tax. But for now it has failed to do so.
Translation by Simon Hunter.