Facebook (NASDAQ:FB) could be facing a substantial increase in its tax liabilities after closing down its operating unit in Ireland, which was used to shield billions of dollars in revenue from U.S. taxes.
The social networking site was sued by the Internal Revenue Service over the creation of the holding company in 2010, contending Facebook downplayed the value of the assets in a bid to pay lower U.S. taxes. The Times of London reported last week that the holding company paid just $101 million in Irish corporate taxes on $15 billion in profits in 2018, the most recent data available.
According to The Times, Facebook hired liquidators to handle the winding down of Facebook Ireland Holdings Unlimited, Facebook International Holdings Unlimited I, and Facebook International Holdings Unlimited II, and in a statement to the newspaper acknowledged that the move is "part of a change that best aligns with our operating structure."
Facebook has reportedly distributed the assets to its U.S.-based operations, a move that actually occurred in July and was done in response to recently enacted and coming tax law changes that have been implemented globally.
The social networking platform generated $55.8 billion in worldwide sales in 2018. But $30 billion, or almost 54% of the total, moved through Facebook International Holdings I, a 39% increase from the year before.
Facebook paid $3.2 billion in total taxes that year, or about 11% of its $25 billion in income.
The Times reports that holding companies like this are structured to pay dividends to the parent organization. Facebook's Irish holding company paid it $14 billion in dividends in 2018.
Some $20 billion in assets have been repatriated to the U.S. as a result of the tech stock's move.