The search, confirmed by an internal Google source, represents the latest instance of multinational corporations coming under scrutiny for allegedly paying low taxes by shifting revenue across borders.
According to the Spanish daily paper El Mundo, which broke the story, authorities suspect Google of not declaring some of its activities in Spain.
It said the investigation centred on VAT payments and taxes on income obtained by companies or people in Spain that were not registered as residents in the country.
A spokesman for the internet company said: “We comply with the tax law in Spain, as in every other country in which we operate. We are cooperating fully with the authorities in Madrid to answer their questions, as always.”
Last month French investigators raided Google’s Paris headquarters, saying the company was under investigation for aggravated financial fraud and organised money laundering.
France, Britain and other countries have complained about the way Google, Apple, Yahoo and other technology companies generate profits in their countries but funnel them elsewhere.
In January, Google agreed to pay £130m in back taxes to the UK Treasury, covering a decade of underpayment by the company.
Google had previously defended its record and told a US Senate inquiry last year that it was “simply the way the global tax system is working” and that the issue was for politicians to fix.
However, the UK deal triggered uproar from tax campaigners and opposition MPs, because it meant that HM Revenue and Customs had in effect allowed the firm to continue routing its UK sales through its business in Ireland.
French prosecutors have said they want to establish whether the Irish company through which Google funnels the majority of its European revenues controls a “permanent establishment” in France.
Google maintains that its offices in Paris, London and other European capitals are not fully fledged businesses, but operate as satellites of its international headquarters in Dublin, providing back-office services such as marketing.
In February, it emerged that France was seeking €1.6bn (£1.2bn) in back taxes from Google. Italy has also demanded more than €200m from the firm, which stands accused of perpetrating tax fraud there for years.
Google’s chief executive, Sundar Pichai, has defended the firm’s tax practices in the past.
“We’re advocating strongly for a simpler global tax system,” he said in Paris early this year.
But authorities in the US and several European countries have begun cracking down on “tax optimisation” practices thought to rob their coffers of billions of euros in potential revenue every year.
The European Union has also been investigating “tax rulings” by some member states that benefit multinationals.
Brussels is investigating the online retailer Amazon’s tax arrangements in Luxembourg, one of a series of such inquiries targeting major global firms, including Apple, Starbucks and Fiat.
guardian.co.uk © Guardian News and Media Limited 2010
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