- Tesla may have reduced US taxes using offshore structures.
- Company reported minimal US federal tax liability for years.
- Netherlands and Singapore entities shifted profits offshore.
Tesla’s tax practices are drawing fresh scrutiny after a Reuters investigation highlighted how the electric vehicle maker may have significantly reduced its US tax liabilities through overseas financial structures, even as its chief executive Elon Musk has publicly criticised tax loopholes.
The report, based on an extensive review of regulatory filings and expert analysis, points to the role of subsidiaries in the Netherlands and Singapore in shifting profits away from higher-tax jurisdictions.
A Long History Of Minimal US Tax
Tesla’s latest annual filing with US regulators showed that the company reported a federal tax bill of zero dollars for 2025.
This is not an isolated instance. According to Reuters, Tesla has reported little or no federal tax liability in the United States for all but one year over the past two decades, despite generating total US revenues of $264 billion during that period.
One of the primary reasons for this has been the use of tax deductions linked to earlier losses, particularly during the company’s long phase of unprofitability. In addition, government incentives tied to clean energy have further reduced the tax burden.
Offshore Units And Profit Shifting
Beyond these factors, Reuters identified another mechanism that may have contributed to Tesla’s low US tax payments: profit shifting through overseas entities.
Corporate filings indicate that Tesla subsidiaries in the Netherlands and Singapore reported around $18 billion in profits in recent years that were not taxed in those jurisdictions. According to the analysis, these profits might otherwise have been subject to US taxation.
Experts consulted by the news agency said that the structure resembles a common multinational strategy known as profit shifting, where companies allocate earnings to jurisdictions with more favourable tax rules.
The analysis suggests that this approach may have helped Tesla save more than $400 million in US taxes.
How The Structure Works
At the centre of the arrangement is a Dutch entity, TM International, described in filings as a non-resident partnership.
The entity reportedly has no employees and is not required to file financial statements or pay taxes in the Netherlands. It is largely owned by Tesla Motors Singapore Holdings, which in turn has received billions in profits from the partnership.
Filings in Singapore indicate that income derived from this structure is not taxed locally, effectively allowing profits to flow through multiple jurisdictions without significant tax liability.
The report noted that neither Dutch nor Singaporean filings provide detailed explanations of the partnership’s operations or how the profits are generated.
Intellectual Property And Tax Planning
Tax experts believe that the structure is likely linked to Tesla’s decision to assign intellectual property rights to foreign subsidiaries.
Such arrangements allow companies to shift profits associated with patents or technology to jurisdictions where income is taxed at lower rates.
Reuven Avi-Yonah, a professor of tax law at the University of Michigan, told Reuters that the structure appears to exist primarily for this purpose. “It’s entirely about shifting profits to low-tax jurisdictions,” he said.
Other experts, including Stephen Shay, a former US Treasury official, and economist Stephen Curtis, agreed with this assessment.
Also Read : UIDAI Introduces New Ways To Get Aadhaar Without OTP: Check PVC And Face ID Options
Musk’s Public Position On Tax Loopholes
The findings stand in contrast to Elon Musk’s public remarks on tax practices.
During a campaign event ahead of the 2024 US election, Musk said he had been offered tax-saving strategies but chose not to pursue them.
“I’m often pitched on these loopholes… That sounds pretty shady. I don’t think we should do that,” he said.
Reuters reported that neither Tesla nor Musk responded to requests for comment on the findings. The Internal Revenue Service (IRS) also did not comment.
Legal But Controversial Practices
Importantly, Reuters found no evidence that Tesla’s tax strategies violate any laws.
Profit shifting remains a widely used, though controversial, practice among multinational corporations. It exploits differences in tax regimes across countries to reduce overall tax liability.
Stephen Shay told Reuters that such practices highlight flaws in the global tax system, noting that “it’s not the way the international tax system should work.”
Disparity Between US And Global Tax Payments
Despite its relatively low US tax payments, Tesla has reported significantly higher tax liabilities overseas.
According to the filings reviewed by the agency, the company has reported foreign tax obligations of about $6.4 billion since its founding, more than 130 times the $48 million tax estimate it reported for the US in 2023.
This disparity raises questions about how profits are distributed across jurisdictions.
Complex Structures And Limited Transparency
Tracing Tesla’s global tax position is complicated by the nature of international tax rules and varying disclosure standards.
A cost-sharing arrangement disclosed in Tesla’s 2015 annual report suggests that intellectual property and related earnings may have been distributed across multiple subsidiaries. Such arrangements have previously been flagged by US authorities as potential vehicles for tax avoidance.
Operations linked to these structures are managed in part through Tesla’s Netherlands-based unit, which reported annual revenues of $28 billion in 2023 and 2024.
However, the filings do not clearly indicate how these revenues relate to the profits routed through the Singapore entity.
Signs Of A Possible Shift
Tesla’s most recent filings may indicate a change in its approach.
The company reported that more than 90 per cent of its global profits in 2025 were earned in the United States, a significant increase from just 27 per cent over the previous five years.
While the filings do not explain the shift, experts suggest it could indicate a restructuring of the offshore arrangements.
Even if the structure has been modified, analysts believe it may have already up to $400 million worth tax savings in prior years.
While Tesla’s practices appear to fall within legal boundaries, they raise broader questions about fairness, transparency and the effectiveness of global tax rules.
