Tuesday, December 29, 2020

No, Facebook has not moved IP out of Ireland

There are a number of reports that Facebook has moved intellectual property out of Ireland:

The story is now in wide circulation but it is wrong.  While it is true that Facebook has relocated some IP licenses to the United States these licenses were not in Ireland to begin with; they were in the Cayman Islands.

The Facebook subsidiary at the centre of these stories is Facebook Internation Holdings I Unlimited.  And as this extract from its most recent (and ultimately last) filing with the Company Registration Office states the subsidiary is “domiciled in the Cayman Islands.”

Facebook Ireland Holdings Unlimited Note

And Facebook itself have been clear that the licenses for the international rights to sell advertising on the Facebook platform were located in the Cayman Islands.  One example of this was when spokesperson Delphine Reyre appeared become the TAXE Committee of the European Parliament a few years ago (video here).

Here are some extracts from Reyre’s contributions to the committee hearing.  But note though that these are the words of one of the parliament’s translators rather than the original dialogue (which was in French).  Some precision may have been lost in translation but the central points are clear. 

Anyway here is some of what Facebook spokesperson, Delphine Reyre, said to the committee [preceded by timestamps in the video recording].

[15:56:34]  There was a question on the Cayman Islands. Our model is exactly the same as Google's.  We do have an operation there in the Cayman Islands, and as my colleague said, as our companies develop around the world, he talks about tax creativity but in fact it's tax conservatism to use these methods.  These are the methods that are used in order to be able to work well at an international level as I tried to explain in my introductory remarks. And that is exactly why we have our intellectual property offices in the Cayman Islands.  I also wanted to tell you that the snapshot you are taking of our business model at the moment is just that: it is only a snapshot. It is going to change; it is constantly changing for all the reasons that I set out before.  For all the work that the OECD is doing, for the BEPS group is doing.  And of course this is constantly evolving because of the decisions make in Ireland on business headquarters, tax headquarters.

[15:59:00] Let me just point one thing out.  The fact that out intellectual property office is in the Cayman Islands doesn't have an impact on most European countries but it does have an effect on how we pay taxation in Ireland, that's as far as non-US countries are concerned. I hoped this sheds light on the situation.

[16:01:52] The model we have plumped for is a usual model, a conservative model.  So when we moved abroad, if you like, we were only a four-year old and we just took up the general model that everyone was using. That was to put your intellectual property in a neutral place that allows you to cover the whole world.  And as Nicholas from Google said the difficulty is that the United States taxes intellectual property all over the world so companies therefore are encouraged to therefore find a neutral location.

[16:29:45] As for the issue of the Cayman Islands you are talking of tax dumping once again we don't agree with that description.  As my neighbour has described it is a question of taxes that are deferred for the United States.  Secondly, which don't effect at all all the countries in Europe apart from Ireland.  And as for Ireland there we are in total compliance with Irish law as it stands today.  We are in perfect compliance with Irish law in the future as well once changes have been made.  As regards the countries where we are set up: The Netherlands, there we have an office; in Switzerland, we don't have an office. And in Luxembourg we have a legal entity. And that's all we have by way of headquarters.

[17:03:16] When it comes to operations in the Netherlands, we have a commercial office. That's all.  So, there is no 'dutch sandwich' or whatever there. As regards Luxembourg there is a legal entity and you asked what these legal entity was doing.  I understand that the legal entity has allowed us to get an inter-company loan and support for an inter-company loan.  I don't have the details.

[17:04:55] I think that your question is whether or not there is a 'dutch sandwich'.  There is not. I can reassure you there is not.  It does not go through The Netherlands.