Microsoft's latest regulatory filing in Europe shows how the company distributes its profits, and it's not evenly distributed. The company published a country-by-country breakdown of its finances for the fiscal year ending June 2025, under a European Union regulation that requires large multinationals to show where they make money and where they pay taxes.
The data shows a familiar pattern in the tech sector: a large concentration of profits in low-tax countries, and much fewer profits in larger but higher-tax markets.
Microsoft said that almost 40% of its pre-tax revenue was recorded in Ireland, even though only about 3% of its global workforce is based in the country. In Germany, by contrast, the company reported (PDF) less than half of 1% of its global profits. Across Europe, excluding Ireland, Microsoft generated less than 2% of its global pre-tax profits.
The numbers reflect the way tech companies structure their businesses. Companies can funnel revenue from software, cloud services and intellectual property through subsidiaries in countries with lower tax rates, even when the bulk of sales, support and infrastructure is located elsewhere. The EU reporting requirement does not change these mechanisms, but it makes them more visible.
In some cases, the figures are staggering. Microsoft reported profit margins of 142% in Luxembourg, despite a tax rate of about 3%. The company recorded $283 million in revenue there with just 34 employees. In Ireland, profit margins were 24%, with a tax rate of just over 14%.
Meanwhile, in countries with higher corporate tax rates – including Germany, France and Italy – Microsoft reported single-digit profit margins, sometimes around 5%. These are significant markets for Microsoft’s enterprise software and cloud services, but they represent only a small share of its reported profits.
Microsoft has said the data doesn't tell the whole story. Differences in accounting rules between countries can create inconsistencies, the company said in a post published alongside the report. “Public Country-by-Country Report” “Microsoft is committed to a tax structure that reflects where our people work, where we invest, and where our operations, assets, and risks are located,” writes Jeff Bullwinkel, the company’s top lawyer in Europe.
The EU transparency rule was passed in 2021 after long-standing criticism of the way companies like Microsoft, Google, Apple and others “fix” their taxes. Iban García del Blanco, one of the directive’s chief negotiators, said the aim was to improve “transparency about where they pay their taxes.”
Although the press releases will range from very select to rare, I said I'd pass...because sometimes the editors hide.
