Google spared from paying €1.1bn back taxes bill in France after legal victory

Google emerged victorious on Wednesday (12 July) after a French court ruled in the tech giant's favour, sparing it from paying a whopping €1.1bn ($1.27bn) in back taxes. The French tax administration had argued that Google was required to pay taxes in France for the years 2005 to 2010 since the US company and its Irish subsidiary had been selling a service for inserting online ads for French clients via its powerful search engine.

The Paris administrative court said Google's European headquarters in low-tax Ireland, Google Ireland Limited, does not have a "permanent establishment" or a sufficient taxable presence in France. The court decided that the Irish subsidiary was not subject to corporate and value-added taxes for the period 2005-2010.

The court also noted that Google France, another Google Inc subsidiary, does not have the human resources or the technical means that would allow it to carry out the advertising services on its own without approval from the Irish headquarters.

"Google Ireland Limited isn't taxable in France over the period 2005-2010," the court said in a statement. The French tax authorities are planning to appeal the court's decision, which must be filed within two months.

The office of the French budget minister, Gérald Darmanin, said French tax authorities will appeal the decision "given the important stakes in these cases, and, more broadly, the issue of fair taxation, in France, of profits derived from the digital economy", the New York Times reported.

In a statement, Google said: "The French Administrative Court of Paris has confirmed Google abides by French tax law and international standards. We remain committed to France and the growth of its digital economy."

This isn't the first time Google has faced off with national tax authorities in courts in Europe.

In May, Google agreed to pay €306m to settle a tax dispute in Italy after the country argued that the company had not paid tax on nearly €1bn of Italian revenue between 2009 and 2013. In January 2016, Google reached a settlement with British tax authorities to pay £130m in back taxes dating to 2005 and pay higher taxes in the future.

Google, Apple, Amazon and Facebook and other tech firms have continued to face criticism over their tax-optimising techniques to minimise their tax bills in Europe.

The decision also comes just weeks after the EU fined Google a record $2.7bn for manipulating search results to promote its own services over its rivals.