Google avoids paying $1.3bn in back taxes

Google emerged on Wednesday as the victor in its latest legal battle in Europe, after a French court said the technology behemoth did not have to pay €1.1 billion ($1.3 billion) in back taxes.

At issue was whether Google had avoided taxes in France by routing sales in the country through an Irish-based unit over a five-year period ending in 2010. An administrative court in Paris ruled that the Irish unit was not taxable in France.

Google has faced a series of legal challenges across Europe, with many of them focused on the company’s tax and competitive practices.

Last month, European regulators levied a record €2.4 billion ($2.7 billion) fine against Google for favouring its products over those of its competitors on its powerful search engine.

European Union officials also brought charges against Android, Google’s mobile operating system, saying the company had forced cellphone manufacturers to install Google services, like mobile search, on the phones.

Other technology companies based in the United States, including Apple, have faced heightened scrutiny in Europe.

In August, the EU ordered Apple to pay $14.5 billion in taxes in Ireland, contending that its deals with the Irish government had allowed the technology giant to pay virtually nothing on its European business in some years. Apple disputed the ruling and is appealing it.

Google employs 700 people in France through its subsidiary there, but the company used a division based in Ireland to sell French customers digital services like its well-known advertising platform AdWords, according to court filings.

The case hinged on whether Google owed various taxes in France, even though it sold services from Ireland.

French tax authorities argued that Google’s French employees were instrumental in selling the ad space, even if the contracts were made with the Irish subsidiary.

In its rulings on Wednesday, the court agreed with Google. It found that the Irish unit did not have a “stable” presence in France, meaning that the French tax authorities could not collect corporate income and withholding taxes from it.

The court also decided that other taxes, including a value-added tax, did not apply.

The office of the French budget minister, Gérald Darmanin, said in a statement, that the country’s tax authorities planned to appeal the court’s decision, “given the important stakes in these cases, and, more broadly, the issue of fair taxation, in France, of profits derived from the digital economy.”

Google said in a statement that the rulings confirmed that it “abides by French tax law and international standards.”

Ireland, with its low corporate tax rates, has emerged as a popular location for multinational companies to route their sales through.

Companies have used tax-planning techniques with names like the “Double Irish with a Dutch Sandwich” to lower their tax bills in Europe.