Dont really want to defend Microsoft but investment holding companies, generally, pay little/no tax everywhere in the world, because their income is mostly dividends (which are generally non-taxable) from other trading companies that should have paid tax already on those profits.
That company wouldn’t pay tax in most countries and the rule changes mentioned wouldn’t change that.
Be interested to know if you could fish up what they did pay. And surely the money going into that investment holding company for dividends is profits from other businesses?
Yes, but the other businesses will pay tax on the profits. Because if you pay on the trading profits and then the parent pays tax on dividends, they pay tax on the same profits twice.
Here has their tax rate at 14%
Again not defending Microsoft, just how corporate tax works.
Wouldn’t they technically be in debt to the investor, and therefore not be in profit?
Only the interest on debt impacts a company’s profit and loss for tax purposes. There’s legislation in place to make sure big multinationals like Microsoft charge themselves market rates so as not to avoid tax but it’s very difficult to enforce.
Not really, it depends on how they are set up. There are 2 ways to invest in a company
-capital e.g. shares in the company and you own it and its only usually repayble if the compamy is wound up, which isnt debt and doesn’t effect the profit of a company (which is my vague recollection of how the Microsoft subsidiaries were held)
-debt e.g. a loan, which is repayable with interest etc. and only interest part is deductible from profits
Either way dividends will generally only be paid from the profits (or a reserve of profits built up over a no. of years) of the company after tax.