Google Hit With Huge French Tax Bill

By Sam Schechner
April 25, 2014

PARIS—French fiscal cops raided Google Inc. 's offices nearly three years ago as part of an investigation into whether the Web giant owes hundreds of millions of euros—or more—in back taxes. Last month, the bill came due.

In March, French tax officials delivered to Google a "tax assessment" that could potentially force the company to pay as much as €1 billion ($1.38 billion) in back taxes for several years over the past decade. Google disclosed the assessment in a securities filing Thursday, but didn't specify the amount.

"In March 2014, we received a tax assessment from the French tax authorities," Google said in the filing. "We believe an adequate provision has been made and it is more likely than not that our tax position will be sustained. However, it is reasonably possible that resolution with the French tax authorities could result in an adjustment to our tax position."

It is unclear precisely what France claims Google owes. French authorities had earlier discussed a tax assessment of more than €1 billion, according to a person familiar with the matter. In February, before the assessment was sent, several French newspapers said the amount was between €500 million and €1 billion. In any case, Google will have the ability to challenge the figure, which isn't yet final, and covers several years, that person and another familiar with the matter said.

Google declined to comment on the amount French authorities are claiming. In a statement, a spokesman said only that the company is "studying" the assessment. Google has said it pays all the taxes it owes.

The battle over French taxes reflects broader complaints by tax authorities across Europe about the corporate structures of Google and other multinational companies. Google, like several other tech firms, has a regional headquarters in Ireland, where it records the bulk of its European revenue. Google units in several other European countries are service providers that offer marketing and support to the Irish unit, according to corporate filings.

In such arrangements, the Irish companies themselves sometimes pay little corporate tax because they pay heavy royalties to Irish-registered holding companies that are taxable in low-tax jurisdiction, in arrangements tax experts say are legal.

Google France, for instance, had 389 employees in 2012, but the unit declared revenue of just €193 million, and €6.6 million in corporate tax, according to a French company filing. In contrast, Google Ireland Ltd. reported €15.5 billion in 2012 revenue, according to an Irish company filing. Google Ireland Ltd. paid €33 million in corporate tax in 2012.

The disclosure was earlier reported by the Financial Times.