03 Dec Microsoft/LinkedIn uses Isle of Man subsidiary to avoid paying millions in tax
During the visit of TAX3 MEPs to the Isle of Man on November 22-23, Irish GUE/NGL MEP Matt Carthy raised the issue of LinkedIn’s Irish-registered Isle of Man subsidiary, part of a Double Irish tax avoidance structure. LinkedIn was purchased by Microsoft in 2016. The Isle of Man subsidiary, LinkedIn Technology Ltd, is part of a scheme that allows the company to declare that at least US$40 million (and possible much more) of Microsoft/LinkedIn’s business is carried out in this zero-tax jurisdiction each year.
Following the fact-finding mission, Carthy said: “One of the main focuses of my visit to the Isle of Man was on the Isle of Man subsidiary of LinkedIn, which I directly questioned Isle of Man Chief Minister Howard Quayle and other ministers about during our visit.”
Research supplied by Christian Aid Ireland, based on LinkedIn’s latest (2017) annual return and auditor’s report, its 2016 annual return and its 2011 accounts demonstrates the artificial nature of this arrangement. The company’s registered office is in Dublin, and the company’s accounts are audited in Dublin, suggesting that they are maintained there. The only physical point of contact in the Isle of Man listed anywhere in the company’s filings is the home address of the sole Manx-resident secretary of the company, Stockton Bodie Birthisel, which is a residential flat in Douglas, Isle of Man (pictured). Carthy presented Chief minister Howard Quayle with a photo of the residential flat that the company is supposedly carrying out business from during the visit.
The 2016 company filings show that Stockton Bodie Birthisel also runs a company formation agency, Atlas Corporate Services Ltd, and that he is the director of 106 other companies from Ireland to the Cayman Islands, including several Manx aircraft leasing companies.
“For more than a decade Microsoft used a Double Irish structure with a Bermuda subsidiary to avoid taxes. But now we know that Microsoft’s company LinkedIn is using a shell company in the Isle of Man to transfer royalties out of Ireland to the Crown Dependency.
“This is largely the fault of the Irish government and the ludicrously long phase-out period it granted to companies using the Double Irish – but the ability to set up shell companies where no real economic activity is taking place is a crucial part of it too.
“LinkedIn avoids tax by transferring 25% of its turnover to the Isle of Man subsidiary as intellectual property royalties, reducing its Irish profit margin to the point where for certain years it paid no corporate tax in Ireland whatsoever. The Isle of Man subsidiary has also paid no tax due to the zero rate here.
“During the TAX3 mission to the Isle of Man, I questioned government officials as to what steps are in place to prevent and detect such shell companies that have no real economic substance? I asked them what steps are being taken to stop this jurisdiction from being used, not just for VAT avoidance, but for corporate tax avoidance.”