Uber takes a double Dutch approach to avoiding taxes
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Taxi service Uber pays almost no tax in the US, where it was founded, thanks in part to two Dutch companies, according to an investigation by Fortune magazine.
The magazine says two Dutch firms – Uber International CV and Uber BV – are central to the company’s tax avoidance strategy, despite the fact the Dutch courts have ruled its Uberpop service illegal.
Top of the tree is Uber International CV which has no employees and is based at a law firm in Bermuda. Meanwhile, Uber BV collects the 20% of the journey price undertaken by every Uber driver.
The agreement between the two firms is that Uber BV is left with an operating margin of 1%—effectively 1% of revenue—after subtracting the costs of operation. The rest of the profits get sent to Uber International CV as a royalty. Under Dutch law, royalty payments are not taxable.
And because Uber International CV is Dutch, the US cannot levy any taxes, Fortune says. Nor can it do so in Bermuda where the company is technically based.
Of every $10 in net revenue that Uber International CV gets from Uber BV, it must pay 14.5 cents back to Delaware-based parent Uber Technologies and this will be liable for US taxes.
Reuters reported earlier this year that Uber has told prospective investors it will reach $10bn in global ride payments in 2015, which means its 20% cut will amount to $2bn. A string of capital injections have valued the company at over $50bn
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