Microsoft Canada MSFT-Q became owned by an Irish affiliate in its 2021 fiscal year, according to documents that offer a rare glimpse at how its multinational parent company has taken advantage of Ireland as a tax haven.
Such a structure could drive down the taxes that the Outlook, Word and Excel software giant pays on any profit it generates in Canada, experts say, by letting Microsoft Canada transfer profits to the lower-tax country with techniques such as royalty payments to the Irish parent company.
Many jurisdictions, including Canada, put little pressure on large multinationals to disclose the finances of their local subsidiaries. But financial statements recently published by Ireland’s corporate registration office show that a Microsoft Corp. branch called Microsoft Round Island One UC became tax resident there as of Jan. 1, 2021.
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In Microsoft’s 2021 fiscal year, which ended that June 30, the documents show that the subsidiary took ownership of Microsoft Canada from a separate, unidentified branch of the company.
That entity then transferred Microsoft Canada to another Irish subsidiary called Microsoft Ireland Research UC, whose filing says it licenses the rights to Microsoft’s products to other segments of the multinational.
It is common for multinational companies to establish subsidiaries in tax-friendly Ireland, which has not yet implemented a multilateral promise to boost its corporate-profit tax rate to 15 per cent from 12.5 per cent. But it is rare to get a sense of exactly how these multinationals’ country-specific subsidiaries are shifted around to more tax-friendly jurisdictions within a labyrinthine corporate structure.
Microsoft sells staple software around the world for consumers, governments and companies alike, while the company is also one of