France: Court annuls Google’s US$1.27b back tax bill

A French court annulled a €1.1 billion (US$1.3 billion) tax adjustment imposed on Google by France’s tax authorities, saying Wednesday that the way the California firm operates in France allows it to be exempt from most taxes.

The French tax administration had argued that Google was required to pay taxes in France for 2005-2010 because the American company and its Irish subsidiary sold a service for inserting online ads to clients in France through its Google search engine.

But the Paris administrative court ruled that Google Ireland Limited doesn’t have a “permanent establishment” in France via the French company Google France, another subsidiary of California-based Google.

The court added that Google France doesn’t have the human resources or the technical means to allow it to carry out the contentious advertising services on its own.

The French government can appeal the decision.

Google has minimized its tax bill in France and other European countries by keeping its headquarters in Ireland, where rates are lower. The strategy has helped Google boost its profits and stock price.
In their ruling, the judges noted that the ads ordered by French clients could not be put online by the employees of Google France themselves because any ad orders ultimately needed approval from Google Ireland Limited.

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