In 2014, seven major tech groups declared collective profits in Spain of €48.2 million, on which they paid €18.3 million in taxes.
These online giants reduced their real profits through complex corporate structures and legal accounting techniques that allowed them to shift part of the profits from Spain to other countries with lower tax rates.
Amazon, Twitter, Microsoft, eBay, Google, Facebook and Apple declared revenues of just over €644 million in Spain, even though some of their products and services are estimated to be worth billions.
For now, Apple is acting within the bounds of the law, and has never been inspected by the Spanish Tax Agency
The practice of profit shifting, which takes place on a global scale, has drawn attention from regulators in the US, Europe and elsewhere in recent years.
This week, the Organisation for Economic Cooperation and Development (OECD) presented an ambitious 15-point plan to curb these tax-avoidance practices. The Base Erosion and Profit Shifting Project hopes to make global firms pay taxes where their activities are really taking place.
As a result of the plan, starting next year all tech giants will have to inform tax authorities about their sales volume, profits and taxes paid in every country where they have a presence.
The most salient case of tax avoidance is Apple. In Spain, it is structured as two firms: Apple Retail Spain and Apple Marketing. The former runs the brand’s store network in Spain, while the latter acts as an agent. Both bill other Apple subsidiaries in Ireland, a country with some of the lowest corporate tax rates in Europe.
In the fiscal year 2014, Apple Marketing made €19.8 million. But this figure really represents about one percent of its total sales, since the company acts as a wholesale provider of iPhones, iPads and Apple computers that are sold at other sales outlets that carry the Apple brand. Declared profit was €5.3 million, leading to corporate tax payments of €2.3 million.
Meanwhile, Apple Retail Spain, which owns the Apple stores, made €217.9 million. But most of the products it sells are bought from an Irish subsidiary with a low profit margin, and much of the benefit is shifted to Dublin, where most of Europe’s Apple subsidiaries are based. This allowed Apple Retail Spain to declare earnings before tax of just €3.9 million in 2014, and to pay €1.5 million of tax on that.
For now, Apple is acting within the bounds of the law, and has never been inspected by the Spanish Tax Agency, its annual report shows. Meanwhile, other major tech groups have developed very similar techniques.
Google, Microsoft and Amazon have similar structures in place, even though the online retailer announced five months ago that it would start paying Spanish tax on the sales in made in Spain.
English version by Susana Urra.