Walt Disney moves money around the globe

A Luxembourg structure set up by The Walt Disney Co is laid out in a 34-step advance tax agreement proposed in October 2009 by Ernst & Young to the Luxembourg tax authorities.

The document shows the corporate parent of Mickey Mouse moving money in circles across the globe while transforming it from cash to debt to equity and back. The document obtained by the International Consortium of Investigative Journalists (ICIJ) does not bear the stamp of approval of the Luxembourg tax authority. Yet ICIJ was able to verify that the actions outlined in the document took place based on the company's public filings in Luxembourg.

Disney's Luxembourg offices are set up in a way that could allow the entertainment giant to move profit away from countries with high corporate taxes like France and Germany.

Disney's series of equity transfers gathered ownership of at least 24 of its subsidiaries in France, Italy, Germany, the UK, Australia, the Cayman Islands and the Netherlands under the umbrellas of two newly created companies in Luxembourg, the new documents show.

A finance arm initially called Wedco Participations SCA made loans to many of the subsidiaries at high interest rates, draining profits from those companies that were often in high-tax countries back to Luxembourg in the form of interest payments.

Cayman Islands

In addition, a Cayman Islands subsidiary, which legally owns at least 16 Disney companies in

Europe

and Australia, sent its profits to Luxembourg in the form of annual dividends.

The Luxembourg internal lender, later called Wedco One (Luxembourg) S.à.r.l. Participations SCA, reported profits for the four years ending September 2013 of more than €1 billion and paid €2.8 million in income tax in Luxembourg, according to the company’s public accounts. That works out to a tax rate of just over a quarter of 1 per cent.

Three companies that are part of the structure recorded more than €2.8 billion in profits from 2009 to September 2013, yet they shared one employee, according to the tax agreement.

They are located in a residential building in Luxembourg with two additional Disney subsidiaries. When a reporter from ICIJ partner MO* Belgium visited, a man introduced himself as the director of the five companies. "Now you can see we really are present here. There is substance," he said, and declined to give his name.

"Our global effective tax rate has averaged 34 per cent for the past five years and 35 per cent in the most recent year," said Zenia Mucha, Disney's spokeswoman in the US.

“We manage our tax affairs responsibly and aim to fully comply with all applicable tax rules.”