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Home / News / Business News / DoJ approaches court for Facebook's global assets transfer details
  • Business

    DoJ approaches court for Facebook's global assets transfer details

    Ramya Patelkhana
    Written by
    Ramya Patelkhana
    Mail
    Last updated on Jul 09, 2016, 10:34 am
    DoJ approaches court for Facebook's global assets transfer details
    Credits:
  • The US Department of Justice sought a court order to force Facebook to provide Internal Revenue Service with more details about the global assets transfer to its Irish subsidiary.

    DoJ's lawsuit filed in a San Francisco court showed that IRS is examining the social network's tax liability for 2010.

    Facebook's tax return showed royalty income from transfers of intangible assets to Facebook Ireland Holdings.

  • In this article
    Most of Facebook's business runs through its Irish subsidiary Facebook uses Double Irish technique to evade taxes in Ireland DoJ approaches court for Facebook's global assets transfer details IRS questions Ernst & Young IRS agent Nina Wu Stone's statement Facebook's intangibles understated by billions Facebook spokesperson's statement Facebook stops booking UK sales via Ireland Google faces the wrath of the UK's anger
  • 2012

    Most of Facebook's business runs through its Irish subsidiary

    Most of Facebook's business runs through its Irish subsidiary
  • It was reported that most of Facebook's global business ran through its subsidiary Facebook Ireland Limited, which was set up in 2009.

    The Irish subsidiary's accounts showed that the largest social network's revenue increased four times to €1 billion in 2011.

    Despite the increase in revenue, Facebook reported a loss for 2011 as it paid most of the revenue as royalty to another overseas company.

  • Double Irish Arrangement

    Facebook uses Double Irish technique to evade taxes in Ireland

    Facebook uses Double Irish technique to evade taxes in Ireland
  • Facebook had allegedly used the Double Irish accounting technique that allowed companies to gain overseas profits without having to pay tax on them; Irish tax law did not include transfer pricing rules.

    For 2011, Facebook Ireland Holdings paid a corporation tax of a mere €3.23m for revenue of over €1 billion.

    However, Facebook stated its actions complied with relevant Irish regulations, including taxation.

  • 09 Jul 2016

    DoJ approaches court for Facebook's global assets transfer details

    DoJ approaches court for Facebook's global assets transfer details
    Credits:
  • The US Department of Justice sought a court order to force Facebook to provide Internal Revenue Service with more details about the global assets transfer to its Irish subsidiary.

    DoJ's lawsuit filed in a San Francisco court showed that IRS is examining the social network's tax liability for 2010.

    Facebook's tax return showed royalty income from transfers of intangible assets to Facebook Ireland Holdings.

  • Valuation

    IRS questions Ernst & Young

    IRS questions Ernst & Young
  • Facebook's transfer of global assets to the Irish subsidiary apart from those in Canada and the US is the crux of the matter.

    IRS is questioning Facebook's accountants- Ernst Young about the valuation of individual assets for income tax.

    User base, marketing intangibles, and online platform were valued as standalone entities; IRS said they were interdependent entities and should be valued as one.

  • Quote

    IRS agent Nina Wu Stone's statement

  • "The IRS issued a number of information document requests (IDRs), reviewed numerous public documents, and conducted interviews of certain Facebook employees. The information gathered suggested to the IRS examination team that the EY approach to valuing Facebook's transferred intangibles on a stand-alone basis was problematic."

  • Understated Values

    Facebook's intangibles understated by billions

    Facebook's intangibles understated by billions
    Credits:
  • Nina Wu Stone said that the IRS examination team's initial findings suggested that EY valuations of Facebook's transferred intangible assets may have been understated by billions of dollars.

    According to DoJ's petition, IRS requested a representative of Facebook to appear in person at IRS' San Jose office on 17 June to produce appropriate "books, records, papers, and other data" but, Facebook had not appeared.

  • Quote

    Facebook spokesperson's statement

  • In response to the latest events, a spokesperson for Facebook stated in an email, "Facebook complies with all applicable rules and regulations in the countries where we operate."

  • Tax-reducing Stucture

    Facebook stops booking UK sales via Ireland

    Facebook stops booking UK sales via Ireland
    Credits:
  • Facebook had announced earlier this year that it would stop booking sales to clients of the United Kingdom via Ireland.

    The social network's move followed the UK government's decision to introduce a new tax on offshore profits.

    Aborting its age-old practice that reduced its taxes, the company said that in the future, it would report its UK sales in Britain.

  • Google

    Google faces the wrath of the UK's anger

    Google faces the wrath of the UK's anger
  • Apart from Facebook, other major technology companies were also criticized for the little amount of tax they pay globally.

    Google, for instance, faced the UK's anger this year again when its representatives were questioned by the UK Parliament's Public Accounts Committee.

    Google's global setup, involving subsidiaries in Ireland, Bermuda, and others, was tax-efficient, but it reportedly operates within the legal frameworks permitted by those nations.

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