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Source: http://www.bfmtv.com/economie/exclusif-profits-call-of-duty-partent-aux-bermudes-562440.html
Exclusive - how the profits of 'Call of Duty' leave to Bermuda
The world leader in video games Activision Blizzard -a Vivendi subsidiary- is very profitable. But it hardly pays any taxes outside the United States, and particularly in France, thanks to a tax optimization scheme.
When you buy the latest installment of Call of Duty and you pay your subscription to World of Warcraft, you probably think that your money goes to California, where Activision Blizzard - the publisher of these games- is based. Or even in France, where its owner Vivendi is based.
But it doesn't. In fact, all profits generated outside of North America go to Bermuda. Indeed, the global leader in video games has implemented a tax optimization scheme in this regard. Result: at the end of March, $ 2.7 billion of profits sleep in this tax haven in the Caribbean - 60% of the total cash flow of the company.
The advantage: they can pay virtually no tax. Thus, in 2012, Activision Blizzard paid only $ 38 million of taxes outside the United States - only 4.8% of its profits...
The result: while international market accounts for half of the editor's profits, it represents only 12% of the taxes paid...
Taxed nowhere
To achieve this, Activision Blizzard has created at least seven subsidiaries in Bermuda, and at least as many in Delaware - the internal tax haven in the United States. And until 2011, the publisher was still using another tax haven - Luxembourg.
In addition, they also use the flaws of European taxation. Thus, they created at least six Dutch subsidiaries using a very special status. These subsidiaries are registered in the Netherlands, but from a fiscal point of view, they are resident in Bermuda. This allows them not to pay tax on profits or the Netherlands or Bermuda... well, nowhere!
Profits only where there is no tax
In the end, this complex scheme follows a simple logic. Where there is no tax, subsidiaries are very profitable. But where a tax is levied, subsidiaries make very little profit - surely a coincidence ...
Thus, all profits outside North America go back to a subsidiary called ATVI CV, registered in the Netherlands, but tax resident in Bermuda, and therefore pay zero tax on its big profits. In 2011, this subsidiary (which has no employees) achieved a pre-tax margin of 46% on a turnover of 660 million euros.
Deliberately impaired profitability
But before arriving in Bermuda, profits go through another subsidiary -Activision Blizzard Coöperatie AU installed near the Amsterdam airport, which itself pays its taxes in the Netherlands, at the legal rate of 25% of its profits.
Alas! This subsidiary is very little profitable: in 2011, it performed a pre-tax margin of just 1% on a turnover of € 953 million. Result: the taxes paid to the Dutch tax authorities are ridiculous: € 2.4 million in 2011.
How do we arrive at such poor benefits? It's simple: for the benefits to be the smallest possible, profitability is deliberately impaired. In particular, Activision Blizzard Coöperatie UA pays - on every video game sold - very significant royalties on patents used by ATVI CV, a subsidiary which is a tax resident in Bermuda. These royalties accounted for 69% of the turnover in 2011, and even 84% in 2010.
Used here is another flaw of the Dutch tax system, which does not tax royalties paid outside the Netherlands - unlike in France, for example. This is the same flaw that is used by Google in its tax evasion scheme.
Hardly any tax paid in France
The same principle applies in France, where the video game publisher has two subsidiaries: Activision Blizzard France SAS and Blizzard Entertainment France SAS. The first hardly pays any tax: 64,609 euros in 2011. The second performs even better: not only does it pays no tax but on the tax authorities owe him money (see below).
Explanation: These two subsidiaries are, again, very inefficient. In 2011, they made a pre-tax margin of only 4% on a total turnover of 363 million euros. In addition, Activision Blizzard France SAS has made losses in the past, allowing it to reduce its current tax.
If the French subsidiaries were as profitable as the whole group, then they would gain much more profit (28% margin before tax in 2011), and therefore pay more tax (35 million euros in 2011).
To make matters worse, the behavior of these two subsidiaries does not seem exemplary. Since the merger between Activision and Blizzard, their staff was reduced by half (in particular via a redundancy plan, cutting 200 jobs), with 557 employees remaining. Activision Blizzard France SAS has also recently undergone tax audits and URSSAF, both of which ended in tax adjustments.
When asked, neither the Activision Blizzard HQ, nor the French subsidiary nor Vivendi have answered us.
Key figures
Income tax
Activision Blizzard France SAS
2011: € -64,609
2010: € -80,773
2009: 0
2008: € +83,384
2007: € +1,574
Blizzard Entertainment SAS
2012: € +3.3 million
2011: € +2.3 million
2010: € +2.9 million
Coöperatie Activision Blizzard UA
2011: € -2.4 million
2010: € -1.2 million
2009: € -2.6 million
ATVI CV
2011: 0
2010: 0
2009: 0
Activision Blizzard Inc (outside North America)
2012: $ -38 million
2011: $ -47 million
2010: $ +16 million
2009: $ -2 million
Source: company accounts
NB: the + symbol indicates that this is a tax credit vis-à-vis the tax authorities
What to remember
Shareholding subsidiaries of Activision Blizzard
Activision Blizzard France SAS
Headquarters: Levallois Perret (France)
Shareholder: Coöperatie Activision Blizzard UA (100%)
Blizzard Entertainment SAS
Headquarters: Versailles (France)
Shareholder: Coöperatie Activision Blizzard UA (100%)
Coöperatie Activision Blizzard UA
Headquarters: Netherlands
Shareholders: ATVI CV (99%) and Activision Blizzard Bermuda Ltd. (1%)
Activision Blizzard Bermuda Ltd.
Headquarters: Bermuda
Shareholder: ATVI CV (100%)
ATVI CV
Headquarters: Netherlands, tax resident in Bermuda
Shareholders: Partners CV AB (99%) and ATVI LLC (1%)
General partner (general partner): ATVI LLC (registered in Delaware)
AB Partners CV
Headquarters: Netherlands, tax resident in Bermuda
General partner: ABIE Holdings LLC (registered in Delaware)
Sources: company accounts, Bermuda Sun