Microsoft Turns to Legal Trick to Skirt £159M ($254M) UK Taxes

The company uses overseas offshores to avoid paying UK taxes every year

This isn’t a new trick, but Microsoft is reportedly using it again in the United Kingdom. The Redmond-based technology giant turned to a legal loophole to avoid paying £159 million ($254 million / €196 million) in UK taxes every year, according to British media.

It seems that Microsoft is channeling its sales in the United Kingdom to various overseas offshores, in order to avoid paying taxes to the United Kingdom and thus increase profits.

The Sunday Times reports that Microsoft is directing its transactions to Luxembourg in order to dodge taxes, while all royalties are then transferred to the company’s European headquarters based in Ireland. Dividends are then sent directly to Bermuda, with Microsoft saving a total of $254 million every year.

Until now, the company has managed to dodge taxes worth £1.7 billion (€2.1 billion / $2.7 billion).

Microsoft isn’t the only large company in the United Kingdom that uses this still-legal system, with Starbucks, AOL, eBay and Amazon turning down to a similar scheme in order to avoid paying UK taxes.

Microsoft, on the other hand, says that it doesn’t do anything wrong and claims that it fully complies with all UK laws and regulations.

“Microsoft pays all due taxes, as required by law, worldwide. Microsoft subsidiaries are fully subject to tax in the jurisdictions in which we operate. We are regularly audited by major tax jurisdictions, which ensure the company is complying with all rules and regulations,” a company spokesperson was quoted as saying by Daily Mail.

A U.S. Senate committee memo revealed in September that Microsoft had avoided paying billions of dollars in taxes, relying a similar offshore scheme that involved subsidiaries based in Puerto Rico, Ireland, Singapore and Bermuda.

The software giant has thus managed to avoid paying $6.5 billion in taxes (€5 billion), according to the memo. Microsoft, however, quickly issued an answer to demonstrate that the company actually supports the US economy by offering thousands of jobs to Americans.

“Through our employment, compensation, and purchases of U.S. goods and services, Microsoft's operations supported roughly 462,000 U.S. jobs. In Washington State specifically, Microsoft has been the single largest contributor to economic growth since 1990; our impact on the state accounted for 32.4 percent of the total gain in state employment,” Microsoft said in a statement at that time.

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