Tesla's Complex Tax Strategies in Brandenburg and the Netherlands

Tesla has been reported to utilize a sophisticated tax optimization model in Germany and the Netherlands, according to investigations by Follow the Money. The electric vehicle manufacturer, founded by Elon Musk, allegedly employs a convoluted network of subsidiaries and internal agreements to shift profits across borders in a manner that minimizes its tax liabilities.

The study examined various documents, including financial statements from Tesla and its subsidiaries in the United States and several European nations, including Germany and the Netherlands. One notable finding is that Tesla has registered seven companies in the Amsterdam district of Zuidoost, which also houses a Tesla showroom. Among these, Tesla Motors Netherlands (TMN) reportedly holds a manufacturing agreement with the Gigafactory located in Brandenburg. In 2023, TMN's revenue was approximately EUR26 billion, which represents nearly one-third of the parent company Tesla Inc.'s total revenue of around EUR85 billion for the same year.

Despite Tesla Inc. reporting losses annually from its inception in 2003 until 2020, TMN has consistently posted profits from its establishment in 2011 through 2020. However, TMN has paid minimal corporate taxes in both Germany and the Netherlands.

In 2023, Tesla Manufacturing Brandenburg SE (TMBS), the official name for the German Gigafactory, paid EUR26.2 million in taxes on nearly EUR80 million in profits. While this amount may seem significant at first glance, it is relatively small compared to the factory's revenue of around EUR7.8 billion. The financial statements indicate that TMBS entered into a 'manufacturing contract' with TMN in November 2019, which raises questions about the profitability of the operations.

This agreement resembles the 'Dutch Sandwich' tax strategy, where the Brandenburg Gigafactory produces the Tesla Model Y under the license of the Dutch entity. For each vehicle manufactured, TMBS receives not only production costs but also a minimal profit margin from TMN. This arrangement has resulted in balancing the revenue of the German plant with equivalent expenses, leading to reduced profits and consequently lower income tax obligations in Germany.

Additionally, the structure of Tesla's business remains opaque and is subject to frequent changes. For instance, six of the seven Tesla companies registered in Amsterdam were operating under the name Tesla Motors Coöperatief UA until December 20, 2023, when the entity restructured as Tesla Motors Holding BV. A year later, the shares were transferred to the Tesla Motors Stichting, a foundation. Subsequently, these shares were passed to the newly established VESPB Global GmbH, based in Zug, Switzerland, where corporate tax rates are significantly lower at 11.8%.

Experts suggest that Tesla has reached an agreement with the Dutch tax authorities, who seem to consider the high internal transfer pricing as standard business expenses. This practice may also be mirrored by Tesla International BV across its more than 40 locations in Australia, Asia, Europe, Latin America, and the Middle East. A tax data leak in the U.S. in 2021 indicated that Musk himself paid little or no taxes, and Tesla faced criticism earlier this year for circumventing federal income tax in the U.S. despite reporting earnings of $2.3 billion.