Facebook plans to restructure tax structure

6 years ago - Published in Finance, Fiscal & Legal

Facebook has become one of the first large technology companies to shake up its tax structure and book less of its revenue in Ireland, as multinationals come under pressure to pay tax in the countries where they operate.

From January 1st, Facebook will begin the process of booking revenues from large advertisers in about 28 countries – including France and Germany and other major European markets – in the countries in which they were earned. It will also pay the taxes on those revenues in those countries, and not in Ireland.

The social networking giant, among other technology firms, has faced growing criticism over the way it reports its taxes, particularly in the European Union. A number of technology companies have been accused of setting up elaborate structures to minimize the amount of taxes they pay.

"Today we are announcing that Facebook has decided to move to a local selling structure in countries where we have an office to support sales to local advertisers,” said Dave Wehner, Facebook’s chief financial officer.
“We believe that moving to a local selling structure will provide more transparency to governments and policy makers around the world who have called for greater visibility over the revenue associated with locally-supported sales in their countries.”
In practice, the change will only affect the revenues of large advertisers which have contact with a local sales office. Non -US revenues from SMEs and individuals who advertise on Facebook using automated booking services will continue to be booked through Ireland.

The company’s international HQ will continue to be in Dublin, but in countries where Facebook has local offices already supporting advertisers, the company said that it intends to begin implementing changes throughout 2018 and into 2019 so that it can file ad revenues there.

It’s not clear yet how much extra tax Facebook will pay as a result of this, and there is still enough wiggle room for plans to change further down the line.

“It is our expectation that we will make this change in countries where we have a local office supporting advertisers in that country,” noted Wehner. “That said, each country is unique, and we want to make sure we get this change right.”