How Tesla apparently avoids taxes in Brandenburg and the Netherlands

Tesla is apparently pursuing a sophisticated tax-saving model in Germany and the Netherlands. Follow the Money magazine claims to have uncovered this. According to the report, Elon Musk's e-car company relies on a complex network of subsidiaries and intra-group contracts to shift profits across borders and reduce the tax burden. In order to uncover the tricks, the research team analyzed documents such as the annual financial statements of the US company and its subsidiaries in the United States and a number of European countries such as Germany and the Netherlands.

According to the report, it is striking that Tesla has registered seven companies in its complex in the Amsterdam district of Zuidoost alone, where a showroom is also located. One of these companies, Tesla Motors Netherlands (TMN), has a production contract with the e-vehicle manufacturer's Gigafactory in Brandenburg. TMN's turnover in 2023 was around 26 billion euros. This is almost a third of the turnover of the US parent company Tesla Inc. which amounted to around 85 billion euros this year. While Tesla Inc. recorded losses every year from its foundation in 2003 until 2020, the Dutch company TMN made profits every year between its foundation in 2011 and 2020. Nevertheless, TMN hardly pays any corporation tax in Germany and the Netherlands.

In 2023, Tesla Manufacturing Brandenburg SE (TMBS), as the German Gigafactory is officially called, paid 26.2 million euros in taxes on a profit of almost 80 million euros. Viewed in isolation, this appears to be a considerable sum, explains Follow the Money. However, compared to the plant's turnover this year, which amounted to around 7.8 billion euros, it is a mere pittance. TMBS's annual financial statements reveal this inconsistency, stating that the company signed a "manufacturing contract" with TMN in November 2019.

Switzerland plays a role alongside the Netherlands

This agreement, which is reminiscent of the Dutch Sandwich tax trick, stipulates that the Gigafactory near Berlin will produce the Tesla Model Y on behalf of the Dutch licensor. For every car produced, TMBS receives only a small margin from TMN in addition to the production costs. In practice, this meant that the turnover of the German factory in 2023 was almost offset by expenses of around 7.5 billion euros. This has led to low profits and a relatively low income tax bill in Germany this year. The very low margin makes it likely that the profits made by TMBS will be shifted to another country, where Tesla is likely to benefit from lower tax rates.

According to the report, Tesla's corporate structure is not only opaque, but is also constantly changing. For example, six of the seven Tesla companies registered in Amsterdam operated under Tesla Motors Coöperatief UA until December 20, 2023. On that date, the company changed its business form and became Tesla Motors Holding BV. Exactly one year later, the shares were transferred to Tesla Motors Stichting – a foundation –. On New Year's Eve, the foundation transferred the shares to VESPB Global GmbH, which had been founded just three days earlier and is based in Zug, Switzerland, where the corporate tax rate is only 11.8 percent.

Tesla has apparently also concluded a deal with the Dutch tax authorities, explained an expert at Follow the Money. According to this, the tax authority considers the high internal transfer prices to be normal market business costs. Tesla International BV, with more than 40 Tesla branches in Australia, Asia, Europe, Latin America and the Middle East, is presumably playing a similar game. A US tax data leak in 2021 already suggested that Musk himself paid little or no tax in the United States. Tesla also came under fire in the US in January because the parent company avoided paying federal income tax in 2024 – with a US income of 2.3 billion dollars.

(mho)