Companies are generally taxed on income (so in your example, 20% on $0.2B). This is the "corporate tax". In addition other taxes may be applied (VAT, labor taxe

Companies are generally taxed on income (so in your example, 20% on $0.2B). This is the "corporate tax". In addition other taxes may be applied (VAT, labor taxes etc), but this is another matter. Companies try to reduce the amount paid in corporate tax (on income) in many ways. Some legal (e.g. creating a separate company that owns the IP, like brands and patents, which then charges a fee for their use to other part of the corporation; this way they can shift profit from a high rate country (France, US) to a lower rate country (Ireland). This seems to be the case here, plus the fact that Luxembourg offered a deal on this tax rate. Another legal way to reduce taxes is by investing your income: this generates depreciation which reduces your profit for the following years (but not your cash at year end, particularly if you finance part of the investment through debt). Illegal ways to reduce your profits: fake invoices, etc. The EU is now discussing ways to tax some companies (in particular tech companies with substantial cost bases abroad (e.g servers, ip, brands could be owned by a separate company in Bermuda which charges sister companies in UK, France, US, thus leaving potentially zero profit to be taxed in those countries) based on revenues (e.g. you have revenues of $1B in UK, you pay 3% tax on that (equivalent to charging 20% tax rate on $150 Million of profit. This would make the separate IP company useless.