Google funneled €8.8 billion ($12 billion) of royalty payments to Bermuda last year, a quarter more than in 2011, underlining the rapid expansion of a strategy that has saved the U.S. internet group billions of dollars in tax.
By routing royalty payments to Bermuda, Google reduces its overseas tax rate to about five percent, less than half the rate in already low-tax Ireland, where it books most of its international sales.
The figures were revealed in the latest filings by one of Google's Dutch subsidiaries, and means that royalty payments made to Bermuda – where the company holds its non-U.S. intellectual property – have doubled over the past three years. This increase reflects the rapid growth of Google's global business.
The company has been at the center of the international controversy over corporate tax avoidance because it earns "substantially all" its foreign income in Ireland and pays relatively little tax in the countries where its customers are based.