How Volkswagen stashed billions of euros in Luxembourg scheme

By and Martin Hesse, Simon Hage (Der Spiegel) et Blaz Zgaga

Between 2014 and 2016, German carmaker Volkswagen placed 5.8 billion euros into a financial structure, run by a staff of five, it registered in Luxembourg, and which paid just 1.7 million euros in taxes on the sum. It is one example of an elaborate system of ‘tax optimisation’ created by the giant group in 2012, despite assurances by its supervisory board chairman, Hans Dieter Pötsch, when he was financial director, that “we have never played such games”. Yann Philippin, Martin Hesse, Simon Hage and Blaz Zgaga report.

This article is open access. Information protects us. I subscribe

In early 2013, Hans Dieter Pötsch, then head of finance for the Volkswagen Group, was asked by German daily Frankfurter Allgemeine Zeitung about the practices of some multinational corporations of establishing financial structures, such as those based in Luxembourg, that allow them to avoid paying taxes in countries where they operate. "For Volkswagen, let me be extremely clear, we have never played such games," he told the paper.


But Pötsch, who has since risen to become chairman of Volkswagen’s supervisory board, made no mention of the fact that in 2012 the German carmaker had set up two holding companies in Luxembourg, into which billions of euros have since been transferred from subsidiaries of the group in order to pay relatively derisory tax on profits. As Volkswagen Group's financial director, Pötsch was responsible for the carmaker’s tax strategy.

Over the past three years, about 5.8 billion euros were transferred into the Luxembourg structures created by Volkswagen (VW), which over the same period paid just 1.7 million euros in taxes, representing a tax rate of only 0.05%. The vast sums in tax payments which the group has escaped have been lost to public funds in numerous countries where VW operates.

The revelations emerge from financial statements and other documents obtained and analysed, in collaboration with Mediapart, by German news magazine Der Spiegel and other media partners grouped together in the European Investigative Collaborations (EIC) journalistic consortium.

The revelations further dog the image of the German carmaker, based in Wolfsburg, and in which the local German state of Lower Saxony holds an almost 12% stake (and 20% of voting rights), which two years ago was shamed by the so-called “dieselgate” scandal.

'Let me be extremely clear, we have never played such games': Volkswagen supervisory board chairman Hans Dieter Pötsch. © Reuters 'Let me be extremely clear, we have never played such games': Volkswagen supervisory board chairman Hans Dieter Pötsch. © Reuters
Pötsch was appointed chairman of Volkswagen’s supervisory board in 2015, just as VW became embroiled in the “dieselgate” scandal, first prompted by the findings of the US Environment Protection Agency that a number of its vehicles were programmed to emit fewer emissions during laboratory testing, in order to meet US emissions regulations. Once on the open road, the vehicles emitted many times more nitrogen oxides than allowed.

It was in 2012 when VW decided to register the two companies in Luxembourg, the principal one being Volkswagen Finance Luxemburg (VFL). As of 2014, the carmaker transferred to VFL the assets of 26 of its non-German based subsidiaries, including Czech carmaker Škoda and Spain’s Seat, but also VW’s national operations in countries including Australia, France, Ireland, Japan and Poland.

VFL, with a full-time staff of five, thus managed 14.8 billion euros of assets.  The system allowed for national VW operations – those selling the vehicles – to transfer dividends to VFL in Luxembourg, where they are not taxed. If they had been transferred to Germany, they would have been submitted to a tax rate of just more than 1%.

Between 2014 and 2016, VFL received dividends worth a total of 5.8 billion euros. It declared profits over the same period of 3.5 billion euros, on which it paid 1.7 million euros in taxes. VFL transferred back to the parent company in Germany in dividends only a part of its profits. At least 3 billion euros remained in Luxembourg, allowing Wolfsburg to escape more than 35 million euros in taxes.

In a statement to Der Spiegel in reply to the information obtained by the EIC, the Volkswagen Group said: "The establishment of holding and financing companies in an attractive regulatory location is done primarily for reasons of finance strategy." It insisted that its efforts to reduce taxation on dividends was in full respect of European and international law and, "has nothing to do with a tax-shelter scheme". Regarding the small number of employees at VFL, it added: "The personnel configuration of our companies in Luxembourg is of high quality and adequate for the task at hand."

The wealth amassed in Luxembourg is recycled within the group in loan arrangements. VFL lends funds to two VW subsidiaries specialised in financing, one also based in Luxembourg and the other registered in the Netherlands, and these in turn lend funds to national VW operations, such as in France, Portugal and Malaysia. These national subsidiaries pay interest on the loans which are tax-deductible.

One of the two 'Autostadt' car delivery towers beside Volkswagen's corporate headquarters in Wolfsburg, Germany. © Reuters One of the two 'Autostadt' car delivery towers beside Volkswagen's corporate headquarters in Wolfsburg, Germany. © Reuters

Volkswagen Group France has debts within the group totalling 1 billion euros, for which it annually pays about 20 million euros in interest. Because they can be offset against tax, the French subsidiary saved about 26 million euros in company tax between 2013 and 2016. Contacted by Mediapart, Volkswagen Group France declined to comment.

The Luxembourg and Dutch financing companies transfer to VFL the interest payments they receive on the loans, in the form of dividends, and which are not taxable.  Through this system, the carmaking subsidiaries and those that sell the vehicles declare lower financial results than if the network centring on Luxembourg did not exist. Subsidiaries such as Škoda and Seat pay company tax in their respective home countries, the Czech Republic and Spain, and send their net profits on to Luxembourg.

Meanwhile, the structures created by VW demonstrate that little has changed regarding the tax-dodging opportunities provided by Luxembourg, despite the LuxLeaks revelations in 2014 and attempts by the OECD to counter the tax ‘optimisation’ practiced by multinationals.

VW insisted that the structure it has established in Luxembourg "is based on legal regulations” and that, “Anything else wouldn't be allowed".

The financial accounts of VFL include elements that suggest that VW has benefitted from a scheme by the authorities in Luxembourg, and revealed by the LuxLeaks documents, whereby large multinationals can negotiate particularly advantageous taxation rates. The carmaker neither confirmed nor denied that it had.

In 2016, VW sold its 50% stake in a leasing company called LeasePlan, and which saw 1.75 billion euros from the proceeds of the sale transferred into VFL. As long as the money does not leave Luxembourg, VFL was not required to pay capital gains tax. Had the transaction been managed in Germany, a 5% capital gains tax would have applied, amounting to about 25 million euros.

The true extent of how much tax VW has escaped by way of the structures it has created in Luxembourg could not be established in this investigation by Mediapart and its partners at the EIC, and which has concerned only those put in place by the parent company. For several VW subsidiaries – Audi and Bugatti, and heavy vehicle manufacturers MAN and Scania – also have financial companies in Luxembourg.

While VW faces an estimated bill of 25 billion euros in fines and costs over the “dieselgate” emissions scandal, it has embarked along with other manufacturers on electric vehicle development and also more environment-friendly transportation schemes. As part of this, it once again turned to Luxembourg to register, in 2016, another company, Volkswagen New Mobility Luxemburg, this time to manage financial investment in electric-powered and driverless vehicles and car-sharing.

 Volkswagen New Mobility Luxemburg has funds of 289 million euros, but no staff. It is instead managed by the five full-time employees at VFL.



  • The French version of this report can be found here.



Si vous avez des informations à nous communiquer, vous pouvez nous contacter à l’adresse Si vous souhaitez adresser des documents en passant par une plateforme hautement sécurisée, vous pouvez passer par SecureDrop de Mediapart, la marche à suivre est explicitée dans cette page.

No mobilization without confidence
No trust without truth
Support us