Tesla Inc. has reported a zero-dollar federal tax bill for 2025, largely due to deductions from prior losses and incentives tied to clean energy tax credits. However, a review of Tesla’s corporate filings has revealed another significant source of savings.
Background
Over the past two decades, Tesla has reported little to no U.S. federal tax liability in most years. This is mainly due to deductions from prior losses and incentives tied to clean energy tax credits.
Untaxed Profits
Tesla’s subsidiaries in the Netherlands and Singapore have reported $18 billion in untaxed profits. If not for profit shifting, a financial strategy that reallocates earnings across jurisdictions, these profits would likely have been declared and taxed in the U.S. This could have resulted in Tesla paying over $400 million more in U.S. taxes.
Regulatory Filings
Regulatory filings in Singapore show that Tesla Motors Singapore Holdings received approximately $18 billion in profits between 2023 and early 2025 from TM International, a Dutch subsidiary of which it owns more than 99%. TM International is registered in the Netherlands as a non-resident partnership and has no employees, and is not required to file financial statements or pay Dutch taxes.
Tax Practices
Tesla’s tax practices are not unlawful, but they have prompted scrutiny over the company’s use of tax loopholes. The company has not publicly addressed any profit shifting, nor clarified how its Dutch and Singaporean subsidiaries factor into its tax strategy.
Wealth Tax Push Intensifies
Tesla’s tax practices have been under scrutiny for some time. In March, Senator Bernie Sanders accused Elon Musk of paying an effective tax rate of less than 3.3%, less than the average tax rate of a truck driver, nurse, and teacher. He called for the wealthy and corporations to pay their fair share.
Proposed Legislation
Following this, Representative Pramila Jayapal and Senator Elizabeth Warren proposed the Ultra-Millionaire Tax Act to rectify the situation. The proposed legislation aims to apply a 2% annual tax and 1% surcharge to fortunes above $50 million.
Musk on Taxes and Loopholes
At an October 2024 Pennsylvania town hall, Musk said he is often offered aggressive legal tax-avoidance strategies but tends to reject them when they seem questionable. In response to a question on corporate taxes, he noted that such “loopholes” can sound “pretty shady” and said he does not believe they should be used.
Conclusion
The debate surrounding Tesla’s tax practices and Elon Musk’s views on taxes and loopholes continues to intensify. As the push for a wealth tax gains momentum, it remains to be seen how Tesla and other corporations will respond to the growing scrutiny over their tax strategies.