Barclays used a little-known tax rule in Luxembourg to avoid taxes.
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When Barclays PLC sold a fund management business to U.S. financial group Blackrock Inc. in 2009, the larger-than-expected $15.2 billion price tag was not the only good news for the British bank's investors.Barclays' tax loss was made possible because it sold its Barclays Global Investors (BGI) business tax free in Britain, but had part of the sale proceeds – $9 billion in Blackrock shares – paid to a subsidiary in Luxembourg.In all, minority shareholders in BGI – mainly BGI and Barclays executives – received over 500 million pounds from the sale of BGI, according to Barclays' 2009 annual report.Barclays told Blackrock to issue those shares not to BGI's U.K. owner Barclays Global Investors U.K., but to a recently created Luxembourg company called Barclays BR Holdings SARL.Even at this share price, the BGI sale had netted Barclays a profit of well over $10 billion, but the bank now had a paper loss of $2.6 billion in Luxembourg, filings show.Much of tax loss from the Blackrock share sale remains because Barclays also generated other tax losses from investments held in Luxembourg, the Barclays spokeswoman said.
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