Leading countries vowed last week to crack down on tax avoidance by multinationals, asking the Organisation for Economic Co-operation and Development (OECD) to draw up new guidelines.
The OECD, which advises its mainly rich members on economic policy, said one area where companies might most effectively avoid tax is by not declaring a tax residence in countries where they have major sales and operations.
It identified the digital sector as an area where this was a particular risk and said it needed to make a detailed analysis of the business models of technology companies.
A Reuters examination of accounts for hundreds of subsidiaries of the biggest U.S. technology companies shows most do not declare a tax residence for their main business in the biggest European markets.
Historically, tax residence has been determined by where companies make sales. By basing themselves in countries like Ireland, the Netherlands and Switzerland - which offer low tax rates or the ability to send money tax-free to tax havens - these companies legally save tens of billions of dollars in tax each year.
The Irish Connection
Many of the firms examined by Reuters declare Irish subsidiaries as their sole or primary tax bases in Europe, even though they operate others in countries like Britain, France or Germany where most of their sales or marketing staff are based. This helped them to pay an average effective tax rate on overseas income of 5.7 percent, less than half Ireland's 12.5 percent headline rate of corporate income tax.
Companies which do business across Europe from Ireland include Microsoft, VMware, Oracle Corp, Adobe, Symantec Corp Red Hat Inc., Synopsys, Inc., Cadence Design Systems, Google Inc, Facebook, LinkedIn, Apple Inc, EMC Corp, Dell Inc, SanDisk Corp, Analog Devices Inc, Xilinx Inc, Altera Corp and Juniper Networks Inc.
Most of those companies contacted by Reuters defended their set up.
Adobe said it "pays the lawful amount of tax owed in the countries where we do business."
Microsoft said its Irish operation was "established largely in response to customer demand to consolidate shipments" and that it pays all the taxes it should.
Symantec said that its "investment in R&D, M&A and its employee base impacts its pretax profits and tax credits in the countries in which it does business... Symantec works in accordance with tax laws in all markets in which it is present."
Google said it chose to base itself in Ireland for of a variety of reasons including its educated workforce, good communication and low taxes. It said it followed the tax rules in all the countries where it operates.
A Facebook spokesman said the firm "takes its tax obligations seriously, and works closely with national tax authorities to ensure we comply with the law."
A LinkedIn spokesman said Dublin was the hub of its European operation, employing around half of its European staff. "LinkedIn abides by all tax laws as determined by the authorities in all the markets in which we operate," he said.
Apple has said it pays all the taxes it is supposed to.
EMC said that it "complies with the tax laws in the jurisdictions in which we operate. Our profits are taxed in the countries in which they are generated."
Altera said it "pays all the taxes we are required to pay" and a spokeswoman for Juniper Networks said it "takes compliance matters very seriously. We look to government bodies to set tax policies, and comply with applicable tax laws and regulations."
Oracle, VMware Red Hat, Synopsys, Cadence, Dell, SanDisk, Analog Devices and Xilinx declined to comment.
A range of companies choose to sell equipment, services or online downloads to customers across Europe from the Netherlands, while also often having affiliated companies across the continent that perform sales or marketing roles. This contributed to an average effective tax rate on overseas income of 5.5 percent in 2012. These companies include Activision Blizzard, BMC Software Inc, NetApp Inc, Applied Materials and Seagate Technology. All declined comment.
Alpine base camp
Switzerland is a popular choice for firms looking for a European tax base because effective corporate tax rates can drop as low as zero; companies that do business in countries like France, Germany and the UK can be designated as service providers to the Swiss units.
Companies which supply clients direct from Switzerland include Autodesk, Salesforce.com, CA Inc, Citrix Systems Inc, Yahoo! Inc, eBay Inc, Electronic Arts Inc and Expedia.
An Autodesk spokesman said it "centralizes operations where it makes business sense, focusing on locations offering a multi-lingual and well-educated workforce, with Switzerland being one example. Autodesk ... fully complies with the tax laws of the many jurisdictions where we operate around the world."
Salesforce.com said it "complies with all applicable tax laws in the jurisdictions in which the company operates."
A Citrix spokesman said: "Citrix companies fully comply with all tax laws, rules and regulations and we cooperate with the relevant tax authorities to ensure we continue to do so."
A Yahoo spokeswoman said: "Yahoo! pays all applicable taxes and closely follows the tax laws of every jurisdiction in which we operate."
eBay said its Bern-based unit eBay International AG was "structured in a manner that best supports our global commerce marketplace business model."
Expedia, Electronic Arts and CA declined to comment.
The Grand Duchy
A number of well-known companies establish a single tax base for their principal business in Luxembourg and then do most of their selling or other work through service providers to the unit in the Grand Duchy. The enables them to minimize their profit in major markets. Amazon.com Inc is one such a company. It says it obeys the tax rules in every country where it operates.
Uncertain sales base
Reuters was unable to determine the location of the European tax residences - and therefore what if any tax was paid - by a number of companies that do business in countries like France, Germany and the UK. These include Linear Technology Corp, Netsuite, Broadcom Corp and Qualcomm.
A Linear Technology Corp spokesman said: "Many factors influence tax rates, which vary by country and over time," but declined to answer questions about the company's structure or tax affairs.
The others declined to comment.
The case of Cisco
Cisco Systems Inc sells to customers across Europe through a UK unit, Cisco International Ltd, while units in France, Germany and Ireland are designated providers of "sales and marketing support" to the UK operation. However, the company's UK tax residence doesn't translate into a big tax bill because Cisco International Ltd is designated a "Buy Sell entity", which effectively acts as an agent for affiliates elsewhere.
A spokeswoman said "Cisco's operational structure is determined by a variety of factors including the location of sales partners, access to customers, local infrastructure, availability of a skilled workforce, and corporate taxes, among other considerations."
Selling the old way
Companies that sell in the traditional way and do not use PE structures to shift the bulk of their revenues include: IBM Corp, Cognizant, Teradata, Priceline.com Inc, TripAdvisor Inc, Intel Corp, Hewlett-Packard Co, Texas Instruments Inc, Motorola Solutions Inc, Western Digital Corp, Micron Technology Inc and Intuit Inc. All declined to comment except TripAdvisor, which said it complies with rules within each EU country where it operates.
(Reporting by Tom Bergin with additional reporting by Himanshu Ojha; Edited by Will Waterman and Sara Ledwith)