A new tax front from a technology giant that ends in an agreement. The Spanish Tax Agency has reached an agreement with the Irish tax authority to settle one of the historical inspections of the American software manufacturer Oracle. The consequence is the payment by the Dublin-based parent company of 30 million euros in Corporate Tax not paid at the time. The deadline was next May 30. After concluding this battle, the company founded by Larry Ellison accumulates other fronts that it has in court with tens of millions of euros at stake.
The origin of this agreement at the highest level dates back to October 2017. After being the subject of an investigation in relation to Corporate Tax in Spain during the fiscal years between 2008 and 2010, a friendly procedure between the Spanish tax authorities began. and Irish that affected the subsidiary with which it operates in Spain and the Irish parent -Oracle EMEA Ltd-. As reflected in the annual report for fiscal year 2022, consulted by La Información, both parties raised a settlement for a total of 30.03 million euros.
This type of friendly procedure is carried out to try to resolve conflicts between tax administrations when the action of one of them has caused an amount of taxes that violates a double taxation agreement. The last one that was set by a technology company was four years ago and was claimed by the subsidiary of the video game manufacturer Nintendo. In the case of Facebook, it is unknown if it was an agreement or, directly, it was an inspection and a settlement act, since it is not specified in the accounts. But the company founded by Mark Zuckerberg paid 34 million in 2019 also through an Irish company to catch up with the Treasury.
The Oracle disbursement of 30 million euros agreed after years of negotiations by both authorities is included in the 2021-2022 tax bill, which ended last May. After the adjustments of tax bases, with the inclusion of payments in ‘stock options’ to its management and staff and other aspects, its theoretical tax burden of the Tax on Benefits is barely 3 million euros. However, the tax adjustment for acts and others raise spending to just over 11 million euros. The previous year it was barely 1.3 million, according to their own accounts.
Oracle Spain works in a very similar way to what other technology giants do. The intellectual property is in an Irish parent company with which the Spanish subsidiary signs different conventions and agreements to distribute the products in this market and also provide support for sales. “You receive commissions and margins on the costs incurred for your sale as sales agents with respect to the income generated from the sale of software licenses, hardware products,” he says. Practically 90% of its business volume in the country is these re-invoicing for services provided to Spanish clients but from Dublin, whose tax conditions are significantly more favorable to the Spanish ones, even with the latest rate increase agreed by the government until 15 % .
Oracle operates in Spain as a commission agent for the Irish parent company, to which it invoices 90% of the declared business in the country
Only 23 million euros were billed directly in Spain last year for consulting work for local clients by Oracle. There are other technology giants that have changed their strategy, registering a relevant part or all of their business through local subsidiaries. The most extreme case is that of Netflix, which had to register all subscription sales in its Spanish company. There are other intermediates such as Microsoft or Google itself, which register a majority with the Iberian entity.
other battles
Beyond these more than 30 million euros that it now faces, Oracle continues to accumulate fronts with the AEAT. The last one has its origin in 2013, when investigations began for the Non-Resident Tax between 2009 and 2012. At first, settlement agreements were issued, the resolution of which is still pending in the National Court. Subsequently, a disciplinary file was initiated that ended in the payment of 27.2 million euros at the beginning of 2022. The company had prepared an appeal before the Economic and Administrative Court and the Hearing. Of that amount, just over 6 million euros has been recognized as an expense and 20.4 million has been included as an asset, considering both the company and its legal advisors that recovery is “highly probable” after completing all the legal proceedings. .
Spain appears as one of the markets in which it maintains the most tax disputes among all in which it is present. Thus, as reflected in the annual report submitted to the US SEC, the software company assured that it found itself in the midst of investigations by tax authorities for Corporate Tax and other indirect taxes, as well as litigation in various countries. In addition to Spain there are other Europeans such as Italy.
The company’s turnover during that financial year in May 2022 was 206.5 million euros, which represents a growth of almost 33% compared to the previous financial year. The operating result amounted to 36.1 million, ten times more than in the last period due to the fact that it will receive the money from the Irish parent company. In the middle of last year, it had almost 1,400 workers in the country. Due to the different labor adjustments carried out -the last one was in 2020 with 180 initially affected-.
In addition to Oracle, Microsoft is the other great technology indicated by the Tax Agency. In addition to those that were already open, the last year saw how the inspectors closed an investigation and demanded another 19 million euros. There are other firms in which the sanctions or settlements have been significantly lower. This is the case of Amazon, which has barely had a liquidation act in its Spanish companies; from Apple, or Google itself, which the last time it was updated barely paid 3 million.
