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Tax Optimization for a Video Game Giant

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Many American corporations in the new technologies sector seek to optimize their taxation offshore to boost their profits. The trend continues with the world leader in video games, Activision Blizzard, a subsidiary of the French company Vivendi.

A  perfectly legal way to optimize taxation

The strategy used by Activision Blizzard relies on setting up multiple subsidiaries to considerably  limit the taxes paid outside the United States. The result is stunning: while the international market produces half of the editor’s revenues, it represents only 12% of the company’s taxes.

To achieve this impressive tax optimization or “tax reduction”, Activision Blizzard created at least 7 subsidiaries in Bermuda, and just as many in Delaware (tax haven within the USA). They exploited flaws in the European tax system by registering subsidiaries in the Netherlands, but with fiscal domiciliation in Bermuda, for example. So that, according to the quarterly accounts of the company, 60% of its cash flow, or 2.7 billion dollars in profits, are sheltered from taxation on this West Indian archipelago.

The profitability of European subsidiaries deliberately undermined:

The tax optimization strategy adopted by Activision Blizzard is based on a simple logic: maximize profits in the subsidiaries where there is no tax and decrease profits in subsidiaries where tax is levied. Thanks to a system of high priced royalties on the patents used, paid by the European subsidiaries to subsidiaries of Bermuda, Activision Blizzard manages to limit the profits it makes on European soil. A mechanism that has proven its worth by obtaining excellent results, for example in France, for both of the subsidiaries located in the hexagon, one paid approximately 65,000 euros in taxes and the other received money from the French tax authorities in 2012. Without the payment of royalties to the subsidiaries in Bermuda, Activision Blizzard would have paid out 35 million euros in taxes according to the estimates

 

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