A compliance report released by Microsoft this week provided a rare look into how tech giants shift profits out of the countries where they have many employees and significant sales and into low-tax havens that help them cut their tax bills by billions of dollars.
Microsoft was most likely the first major U.S. technology company to make a so-called country by country report of its finances to comply with a new European Union directive. Like other big companies, Microsoft uses transactions between subsidiaries to shift profits around to reduce its tax bill. The report revealed a consistent pattern: high returns in low-tax jurisdictions and slim margins in higher-tax ones.
Microsoft’s report detailed the company’s sales, tax bills and employees in dozens of countries, mostly in Europe, for its fiscal year that ended in June 2025. The report showed the sometimes absurd results.
Microsoft said it had generated almost 40 percent of its pretax income in tax-friendly Ireland, where it employed about 3 percent of its global work force. In higher-tax Germany, the largest economy in Europe, Microsoft earned barely half of 1 percent of its global profits, it said. Excluding Ireland, the company said, it generated less than 2 percent of its worldwide pretax earnings in Europe.
Microsoft said in a blog post accompanying the report that it followed all the laws in every jurisdiction where it operated, and that the reporting standards created some inconsistencies among countries.
“Microsoft is committed to a tax structure that reflects where our people work, where we invest, and where functions, assets, and risks occur,” wrote Jeff Bullwinkel, Microsoft’s top lawyer in Europe.
The Internal Revenue Service is challenging profit-shifting transactions used by Microsoft, and is seeking back taxes of nearly $29 billion. The company has said it disagrees with the I.R.S. and said in a securities filing that it “will vigorously contest” the proposed tax bills.
In the wake of the global financial crisis more than a decade ago, European countries slashing basic services trained their sights on tax dodges employed by big companies, such as Google, Apple, Starbucks, Amazon and Facebook.
The European Parliament proposed the country by country reports to increase “the transparency on where they pay their taxes,” said Iban García del Blanco of Spain, one of the directive’s lead negotiators. The reports would give the public insight into companies’ economic activity — which can be quite different from where they claim to earn their income for tax purposes. The European Parliament passed the directive in 2021, and it is now taking effect.
Microsoft’s report showed that, despite the efforts to crack down on tax havens, companies are able to “shift their profits to low-tax jurisdictions with no corresponding shift in real activity,” said Reuven Avi-Yonah, a tax law professor at the University of Michigan.
For years, Microsoft has disclosed that it booked a disproportionate amount of earnings in Ireland, whose porous tax laws have permitted big companies — including Google, Facebook and PepsiCo — to avoid billions of dollars of taxes by transferring income into island havens like Bermuda and Grand Cayman.
For its 2025 fiscal year, Microsoft reported profit margins of 24 percent in Ireland, where it paid taxes at a rate of just over 14 percent. In Luxembourg, Microsoft claimed profit margins of 142 percent and a tax rate of just 3 percent. The company said it had $283 million in pretax income and only 34 employees in the tiny country.
But in several of Microsoft’s biggest markets — where tax rates exceed 25 percent — it reported tiny profit margins. In Germany, France and Italy, the company claimed single-digit profit margins, sometimes barely 5 percent.
The report still gave only a partial picture, because it lumped in the United States with other countries.
Microsoft said it had built its presence in Ireland over more than four decades, and it has grown into the company’s primary hub in the region. It employs roughly 6,600 people there, more than anywhere else in Europe.
For 13 years, international regulators have tried to crack down on how big companies shift earnings into tax havens, and more than 100 countries have passed lawscreating a minimum corporate income tax. But the Trump administration struck an agreement this year with the Organization for Economic Cooperation and Development that effectively exempts U.S. companies from much of that crackdown.
As a result, U.S. companies last year avoided at least $40 billion in taxes from parking profits in havens, The New York Times found.
Mr. Bullwinkel said Microsoft’s capital expenditures in data centers, its corporate work forces and its work through local partners were also key investments in local economies. “Tax is one important measure of contribution, but it is not the only one,” he wrote.
Jesse Drucker is an investigative reporter for the Business section and has written extensively on the world of high end tax avoidance.
Karen Weise writes about technology for The Times and is based in Seattle. Her coverage focuses on Amazon and Microsoft, two of the most powerful companies in America.
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Blacklisted entities handled $100 billion in crypto in 2025, financing terrorism and weapons
Iran, Russia, North Korea and other targets of sanctions have dramatically increased their use of virtual currencies to duck U.S. pressure, handling around $100 billion worth of crypto last year alone, firms that track the flows say.
They are also becoming more sophisticated in how they navigate the market, creating their own digital tokens and crypto exchanges to help process transactions, the firms and Western authorities say.
Iran and Russia have used virtual cash to buy drones and weapon parts, and Russia has used it to pay salaries for seafarers who smuggle their sanctioned crude around the world, according to Western officials and crypto analytics firms. North Korea, which has mastered the art of stealing cryptothrough hacks and other cybercrimes, has used it to buy fuel and military equipment, officials say.
Using crypto enables them to bypass traditional banks, which play a central role in policing sanctions imposed by the U.S. and others.
“Crypto has changed the sanctions evasion game significantly,” said Kaitlin Martin, a senior intelligence analyst at analytics firm Chainalysis. It estimates that cryptocurrency addresses linked to sanctioned entities received over $100 billion in 2025, almost eight times the amount received in 2024.
Russia considers international sanctions to be illegal under international law and has “deployed and developed alternative mechanisms that allow the economy to function normally,” Kremlin spokesman Dmitry Peskov said. North Korea recently called allegations that it engages in cybercrimes “absurd slander” and an extension of Washington’s “hostile policy” toward Pyongyang. Tehran didn’t reply to a request for comment.
Western officials are struggling to keep up as crypto becomes more popular for sanctions evasion. Although the U.S. has temporarily waived sanctions on Iranian oil as it negotiates a possible peace agreement with Tehran, it still considers sanctions to be a key tool to pressure adversaries worldwide. Washington is holding out the possibility of restoring oil sanctions on Iran if a peace deal isn’t achieved.
Last month, Washington sanctioned four Iranian crypto exchanges, including its largest, Nobitex. Treasury Secretary Scott Bessent said the U.S. has seized $1 billion in crypto from Iran. Nobitex and another sanctioned platform, Bitpin, denied they facilitate illegal activities and said their customers are ordinary people. The other two exchanges didn’t reply to requests for comment.
In the U.K., authorities in May blacklisted one of the world’s largest crypto exchanges on suspicion of supporting Russia’s government. The exchange, HTX, said it would work with authorities to promptly address any concerns.
Getting a firm grip on the market is nearly impossible, because much of the industry isn’t regulated, and transactions can be done anonymously, making them hard to trace.
The Iranian crypto platforms recently sanctioned by Washington are only the most prominent nodes in a larger network, said Ari Redbord, head of policy at analytics firm TRM Labs, which monitors more than 100 Iranian crypto exchanges.
“Their takedown does not dismantle the architecture underneath them,” he said. If anything, he said, the market is becoming harder to police.
“Over the last year, Iran and Russia have moved from one-off crypto transactions to building layered sanctions evasion programs.”
In Allah’s name
Unlike traditional money, which is usually linked to bank accounts, crypto transactions aren’t easily identifiable. Digital wallets holding crypto are represented by numbers and letters, with no names attached. Anyone can create a wallet and hold or transfer crypto with minimal disclosure of where they got their funds.
Hamas, the U.S.-designated terrorist group and Iran ally, has asked for donations in crypto, according to the Federal Bureau of Investigation. Last year, an FBI agent came across one of the group’s requests on Telegram, according to a court request filed by the FBI to seize the funds.
When a confidential source for the agent contacted the email provided, the source received instructions to visit a money transfer office that converts traditional currencies into crypto, and then provide the teller with a wallet address where the money should be sent, the FBI said.
“It is necessary not to inform the party that will undertake the transfer on your behalf of our identity,” the instruction said. It also said Hamas changed the wallet address for donations constantly to avoid detection.
“May Allah write you the reward and reward you with all good,” the instruction said.
Eight wallets Hamas used for donations received $70,000 in cryptocurrency during a two-week period, according to the FBI agent.
Hamas didn’t respond to a request for comment.
Iranian crypto
In Iran, dozens of crypto exchanges have popped up in recent years, driven in part by demand from everyday citizens who need ways to transfer money and build savings amid a weakened rial currency and Western sanctions.
Iran’s Islamic Revolutionary Guard Corps has used crypto exchanges—both at home and abroad—to get paid for oil sales, particularly from China, its biggest customer.
The Wall Street Journal has reported how billions of dollars have moved through Binance, the world’s largest crypto exchange, to networks financing the Revolutionary Guard. Binance has called the reporting inaccurate, adding that it didn’t permit any transactions with individuals or digital wallets that were sanctioned at the time and that Binance took all appropriate actions once they were. The company filed a lawsuit against the Journal over its reporting. A Journal spokesperson said it stands by its reporting.
The Journal has also reported that CoinEx, an eight-year-old exchange founded by a Chinese engineer, has played a growing rolein connecting Iran’s crypto operations to the world as the country tries to evade sanctions. CoinEx said it doesn’t “provide services to any sanctioned entity or individual” and has “never knowingly provided any form of facilitation to any party after it was designated.”
1. A buyer in China wants oil from Iran.
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2. In one common scenario, the Chinese buyer deposits the oil payment, in yuan, in a bank account belonging to a front company in Hong Kong.
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3. The front company exchanges the money for crypto and transfers it to Iran-controlled digital wallets.
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4. The crypto is then converted into rials at a local Iranian exchange, or transferred to wallets belonging to Iranian proxy groups such as Yemen’s Houthi militants.
Russian workarounds
Russia has also become more sophisticated in using crypto, Western authorities say, since the U.S. shut Russian banks off from the global financial system in response to the Ukraine war.
Last year, a company owned by Ilan Shor, a sanctioned Moldovan oligarch, and Promsvyazbank, a Russian state-owned bank sanctioned for its role in serving the country’s defense sector, joined forces to create a token called A7A5, according to Western authorities and crypto-analytics firms.
The token is pegged to Russia’s currency and can be used in its place to get around restrictions on how rubles can be transferred abroad. Users buy the token using rubles inside Russia and then change it to another cryptocurrency, such as the stablecoin Tether, which can be used internationally or converted into U.S. dollars.
At a conference in Russia last year, Shor said part of A7A5’s appeal is that it “has no risk of being frozen.” Neither his company nor Promsvyazbank replied to requests for comment.
Kaitlin Martin from Chainalysis said she detected payments to China-based drone vendors that were sourced from A7A5-to-stablecoin swaps. Her firm estimated that in total A7A5 processed over $90 billion in transactions last year.
Even though the U.S. and other countries sanctioned the company behind A7A5, the currency continues to be used.
Russian businesses are also using other crypto. A Moscow-based supplier for Rosatom, a Kremlin-controlled nuclear company, needed $1 million worth of equipment from an Asian firm, but couldn’t transfer the money because of sanctions, according to an indictment filed by the U.S. government last year.
The funds were converted into cryptocurrency and sent to a digital wallet belonging to a Russian man, Iurii Gugnin, in the U.S., the indictment said. Gugnin then allegedly used a crypto exchange to convert the virtual currency into dollars, which were deposited in his company’s account at a New York bank.
From there, prosecutors said Gugnin transferred the $1 million to the bank account of the Asian firm, in South Korea.
Rosatom said it couldn’t verify the allegations in the indictment, which targets Gugnin, but said it “carries out its financial activities through lawful and legitimate channels.” It also said it views sanctions targeting Russian enterprises as discriminatory.
Gugnin moved more than $500 million through the U.S. financial system on behalf of Russian and other clients, according to U.S. prosecutors. Through him, Russian clients were able to procure U.S. technology components, including a computer server that faced export controls for antiterrorism reasons, the prosecutors said.
Gugnin was arrested last year and in April pleaded guilty to four charges, including conspiracy to launder money and sanctions violation. A lawyer for Gugnin didn’t reply to requests for comment.
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