08 Apr Microsoft sends ‘non-taxable’ €98 billion to US via little-known Irish firm
Microsoft has disclosed huge dividend payments from its Dublin business, signalling an expansion of its financial activities in Ireland despite the rising corporation tax rate.
In some of the largest payments to come to light since Ireland became a global hub for American tech groups, Microsoft used a little-known Irish company to send $107 billion (€98 billion) in two years to its US parent.
The dividends were revealed in new corporate filings by a Dublin company, Microsoft Round Island One Unlimited Company, which has no employees other than its four directors. Very little Irish tax was paid on such dividends but Microsoft said the payments were “non-taxable”.
Moving funds worldwide
The software group, which employs some 3,000 workers in other parts of its Irish business, uses the company to move money around the world.
The increasing flow of cash into and from this company suggests Microsoft is growing its financial operations in Ireland even as it cuts the workforce. The group has eliminated 180 Irish jobs this year as part of a global drive to reduce the number of people it employs.
Round Island One has paid $21 billion in dividends to its parent since June, on top of $55.72 billion the previous year and another $30.5 billion the year before. In the past six years, this company sent some $323 billion to the parent group in the US.
Such payments are a striking illustration of the high profitability of tech groups in Ireland, despite the elimination in recent years of contentious tax rules that were criticised for being too favourable to business.
When the Government resolved, in the face of international pressure, to raise the corporation tax rate to 15 per cent from 12.5 per cent it fanned anxiety that some large international companies might rethink their operations in Ireland.
Although Microsoft was one of several tech groups to cut jobs recently, the State’s revenues from the tax on business profits jumped to record levels in 2022 and another surge is forecast this year.
The big concern now is that the Government is vulnerable to any economic shock because of its increasing reliance on the tax heavily concentrated on large groups such as Microsoft.
Papers filed in Dublin this week for Round Island One, a linchpin in Microsoft’s global network, show a big increase in the scale of its operations since the start of the decade.
The company manages investments worth tens of billions of US dollars for the group’s business in other parts of the world.
The company’s annual pretax profit rose to $77.98 billion in the year to June 2022 from €30 billion in the previous year. This money comes from dividends paid by Microsoft operations in other parts of the world. The Irish company then returns it to the US parent.
Microsoft Round Island One paid $1 million in tax in the financial year, considerably less than the $9.74 billion that would have been due if the current 12.5 per cent tax rate was applied to its profit.
However, the company said €9.76 billion of its profit in the year was not liable for Irish tax. “The profits of [Round Island One] are largely driven by intercompany dividends received, which under standard tax rules are non-taxable,” Microsoft said in response to questions.
“Microsoft is fully compliant with all local laws and regulations in every country in which we operate.”
The group remains one of the biggest Irish taxpayers. Filings this week by two other Microsoft companies in Ireland show they paid €3 billion in tax in the most recent period.