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Microsoft offshore company: how do they not pay taxes?

2018-01-30

If a citizen of Russia hear the word "Open offshore", there are negative emotions and statements about how much the opening an offshore company is bad. Even threaten the prison for allegedly using offshore. As a rule, this is a citizen far from the topic.

Indeed, for opening an offshore company and using for such dark purposes as the financing of terrorism, one really sends a prison. But offshore registration and using as a tool of tax planning does not lead to the prison. On the contrary, with the proper conduct of business, it leads to success better than if the beneficiary were to register a company in his country with high taxes.

In addition, the conditions in the CIS countries are not the best to conduct business on an international level. But the registration of offshore provides an opportunity to better cooperate with international companies.

In the aggregate of tendencies characterizing the development of the world economy, we can highlight the growing popularity of offshore zones as a way to optimize tax costs. The last two decades have been marked by the rapid "offshorization" of the world economy, as well as a sharp increase in the contradictory impact of offshore companies on the state of world markets and international economic relations. In this period, the number of countries and territories that declared their offshore status expanded, while the number of business entities registered in these territories (offshore companies and funds, trusts, secretarial companies, etc.) increased sharply, the list of services provided by them increased significantly. Offshore business began to actively penetrate into new areas of economic activity and into new markets, primarily to previously closed markets of post-Soviet countries. In historical retrospect, the very methods of conducting offshore business have been significantly improved, its forms and structure have become more complicated.

It is possible to give an example with the Microsoft's offshore company - about how the registration of the offshore company by Microsoft allowed to significantly reduce tax pressure and send saved money to new startups.

How does Microsoft use an offshore?

When you buy Microsoft products, your money does not go on a short route to the company's headquarters. Instead, your money after passing the tax filters come to a MS subsidiary in Nevada.

From there, most of this money goes a complex global road that eventually leads across the ocean, with 2 stops on the tax haven of Bermuda.

Thus over the past 21 years Bill Gates' brainchild has built a network of subsidiaries to minimize the taxes that it pays to authoriesaround the world.

Microsoft has revenue of $ 108 billion. This indicates that the success of the company excludes not only a relatively high rate of income tax in the US, but also payments for income tax in the UK and other jurisdictions where it sells products.

Offshore company registration: is it legal?

The structure created by Microsoft is legal, and company representatives are claiming that they are being paid the appropriate amount of taxes in the jurisdictions in which it operates. And this despite the fact that Bill Gates' brainchild ordered offshore company registration in the jurisdictions.

According to Microsoft's financial statements, only with respect to Microsoft's operations outside the United States, the company's tax rate is only 5%. This rate is below the tax rate in any of the jurisdictions in which the company conducts business. The highest federal income tax rate for the US population is 35%.

Bill Gates' brainchild has created a series of shopping centers that, in exchange for the initial payment of the parent company and the constant payment of research costs, will have the right to profit from the company's software in their field.

The first shopping center was established in 2000 in Ireland, the jurisdiction with one of the lowest tax rates. Then, in 2003 in the jurisdiction named Singapore, and later - PuertoRico.

Officially conducting its sales from low-tax locations and a small population, the company avoids paying a profit tax in jurisdictions where most of its customers live.
Local tax authorities usually ignore the sales of foreign companies that do not have "permanent representation" at the local level.

If you want to open an offshore like Microsoft - please, contact us!