How Ikea saved 500+ million in taxes thanks to international tax planning
IKEA, the Swedish furniture retailer, has been able to save a significant amount of taxes through a variety of international tax planning strategies.
One strategy used by IKEA is the establishment of subsidiaries in countries with lower corporate tax rates. For example, IKEA has subsidiaries in countries such as Luxembourg and the Netherlands, which have lower corporate tax rates than Sweden. By routing profits through these subsidiaries, IKEA is able to reduce its overall tax liability.
Another strategy used by IKEA is the use of intercompany transactions to shift profits to subsidiaries in low-tax jurisdictions. This can be done through the transfer pricing of goods and services between subsidiaries, as well as through the use of interest payments on intercompany loans.
IKEA also uses tax havens such as Bermuda, Luxembourg and Lichtenstein to park its intellectual property rights, such as trademarks and patents. This allows the company to pay lower taxes on royalties and license fees.
Lastly, IKEA also makes use of tax incentives offered by various countries to attract foreign investment.
It's worth noting that these tax planning strategies are legal and are commonly used by multinational corporations. However, the use of such strategies has been a subject of criticism and public debate, as it leads to loss of revenue for the countries where the companies operate and can also be seen as a form of tax evasion by some.
Overall, it can be seen that IKEA has been able to effectively use international tax planning strategies to reduce its overall tax liability and increase its profits.
Results: IKEA expand its global reach and increase its market share
IKEA has implemented various strategies to expand its global reach and increase its market share. One of the ways it has done this is through its use of franchising.
IKEA uses a franchise model where it grants the right to use its trademark, designs, and products to independent franchisees. This allows the company to expand its operations quickly and efficiently without the need for heavy investment in new stores and infrastructure.
The company also has a e-commerce platform for online sales and recently started to offer services such as interior design, installation and furniture assembly. This allows the company to reach new markets and customers and increase its revenue streams.
Moreover, IKEA has also been expanding its presence in the Asia-Pacific region, where the middle class is growing rapidly and the demand for furniture is increasing. It has opened stores in countries such as China, Japan, and Australia, and plans to open more in the future to tap into the potential of this market.
Overall, it can be seen that IKEA has been able to effectively use strategies such as franchising and market expansion to continue its growth and increase its market share globally.
Results: IKEA has grown to become a global leader
IKEA has grown to become a global leader in the furniture retail industry. As of 2021, the company operates over 400 stores in 52 countries and has a revenue of around 40 billion euros.
One of the key factors that has contributed to IKEA's success is its unique business model. The company designs and manufactures its own products, which allows it to keep prices low while maintaining a high level of quality. Additionally, IKEA stores are known for their large size and unique layout, which creates an immersive shopping experience for customers.
IKEA's focus on sustainability and environmental responsibility has also played a major role in its growth. The company has set ambitious goals for reducing its environmental impact and promoting sustainable practices throughout its operations.
IKEA's strong brand and reputation for quality and affordability has also helped it establish a loyal customer base around the world. The company's marketing campaigns have been effective in promoting the IKEA lifestyle and values, which have resonated with customers globally.
IKEA's global expansion strategy has also been a major contributor to its success. The company has been able to enter new markets and build a strong presence in regions such as Asia and North America, which have become key drivers of its growth.
In conclusion, IKEA's unique business model, focus on sustainability, strong brand reputation, and effective global expansion strategy have all contributed to its growth as a global leader in the furniture retail industry.
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