BOTTOM LINE: Microsoft's latest regulatory filing in Europe pulls back the curtain on how the company distributes its profits across borders, and the split is far from even. The company published a country-by-country breakdown of its finances for the fiscal year ending June 2025, under a European Union rule that requires large multinationals to show where they earn money and pay taxes. The data shows a familiar pattern in the tech sector: a heavy concentration of profits in low-tax jurisdictions, with far less reported in larger, higher-tax markets where business activity is more visible.
Microsoft said nearly 40% of its pretax income was booked in Ireland, even though only about 3% of its global workforce is based in the country. In Germany, by contrast, the company reported less than half of 1% of its global profits. Across Europe as a whole, excluding Ireland, Microsoft generated under 2% of its worldwide pretax earnings.
The numbers reflect how tech companies structure their operations. Companies can route revenue from software, cloud services, and intellectual property through subsidiaries in lower-tax countries, even when most of the sales, support, and infrastructure sit somewhere else. The EU's reporting requirement does not change those mechanics, but it does make them more visible.
