Google Wins Major Court Battle, Evading $1.3B Tax Bill in France

On Wednesday, Google won the victory in one of its many court battles after the French court threw out the government’s case seeking $1.3 billion, or 1.12 billion euro, in back taxes levied against the tech giant.

In May 2016, French prosecutors raided the Alphabet Inc. unit’s Paris office after months of preparation spent offline to avoid leaks. That ongoing investigation seeks to verify whether Google’s Irish unit has a permanent establishment in France.

Back in February, France took Google to court seeking back taxes, but it wasn’t clear whether the search titan, whose European headquarters are based in Ireland, would be subject to continental taxes.

Now, the administrative tribunal of Paris ruled that the technology behemoth’s advertising business doesn’t have a taxable presence in France, absolving it of responsibility for five years of back taxes for a period ending in 2010. The tax authority had accused Google of routing ad sales in the country through its Irish-based subsidiary.

“Google Ireland Ltd. isn’t taxable in France over the period of 2005 and 2010,” the court said in a statement.

Google employs 700 people in France through its subsidiary there, but the company used a division based in Ireland to sell French customers digital services like its well-known AdWords, according to court filings.

The case is one of the several things pitting U.S. tech companies against regulators in the European Union over matters that include tax payments, antitrust violations and privacy.

“After a thorough review by the public rapporteur, the French Administrative Court of Paris has confirmed Google abides by the French tax law and international standards,” Google said in a statement. “We remain committed to France and the growth of its digital economy.”

Google’s victory comes as various U.S. tech companies face increased scrutiny across Europe. Last month, the European Union slapped Google with a 2.42 billion euro, or 2.72 billion dollars, antitrust fine for favoring its own shopping services in its search results over those of rivals. The fine is the biggest antitrust penalty the EU has ever applied to a single company, exceeding the $1 billion fine to Intel in 2009.

EU officials also brought charges against Android, Google’s mobile operating system, saying the company had forced cellphone manufacturers to install Google services, like mobile search, on the phones.

Spain is also continuing a back-tax case against Google, seeking payment of $349 million.

Regulators are also investigating whether Facebook violated EU privacy laws by the use of users’ personal data to boost advertising revenue. Germany recently passed a law that subjects with social media companies to fines if they do not immediately remove posts promoting terrorism at the government’s discretion.

Apple has also faced heightened scrutiny in Europe. Last August, the European Union ordered Apple to pay  $14.5 billion in taxes in Ireland, contending that its deals with the Irish government had allowed the technology giant to pay virtually nothing on its European business in some years. Apple disputed the ruling and is appealing it.

Ireland, with its low corporate tax rates, has emerged as a popular location for multinational companies to route their sales through. Companies have used tax-planning techniques with names like the “Double Irish with a Dutch Sandwich” to lower their tax bills in Europe.

Meanwhile, by 7:59 PM GMT-4, Alphabet Inc. (NASDAQ:GOOGL) traded 1.48%, or 14.13, to $967.66. It opened in $960.86, with a session high of $969.63 and a session low of $957.04. Its market capitalization was 662.88 billion, with a P/E ratio of 32.68.

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