A French court handed Google’s parent company, Alphabet, a reprieve from a 1.11bn-euro ($1.27bn) tax bill on Wednesday in a major victory for the tech giant.
The decision comes after six years of fighting with the French tax authority over back taxes it claims are due from the tech firm for the years 2005 to 2010.
The French tax administration argued that Google had to pay taxes in France because the California firm and its subsidiary in Ireland have been selling a service for inserting online ads to clients in France for years through its Google search engine.
But the Paris administrative court noted that the subsidiary, Google Ireland Limited, doesn’t have a “permanent establishment” in France via the company Google France, also a subsidiary of the US group Google Inc.
The court added that Google France doesn’t have the human resources or the technical means to allow it to carry out the contentious advertising services on its own.
The decision will be closely followed by other US companies – including Apple and Amazon – currently under attack for the low rates of tax they have paid in Europe. It is likely to be appealed.
Earlier this month, the European parliament backed new rules aimed at preventing multinational companies from shielding their European profits in low-tax countries such as Ireland. The rules would force them to give detailed information on where profits are made and to publish data such as employment numbers to show that they are not running shell companies.
Last year, Google agreed to pay £130m in back taxes to the British tax authorities and bear a greater tax burden in future. The deal came after the company’s tax schemes was criticised in parliament and called “devious, calculated and in my view unethical” by the Labour MP Margaret Hodge.
