Key facts
- Crocs Inc. allegedly used a Maltese subsidiary to hold over $3 billion in patents and intellectual property.
- The company is accused of shifting trademarks and charging intercompany loan interest to reduce its tax burden.
- Crocs reportedly cut its 2023 tax liability by $218.6 million through this strategy.
- Experts suggest the IRS is scrutinizing offshore structures lacking economic substance.
- Crocs shares declined following the investigative report.
Crocs Inc. is facing scrutiny following an investigative report alleging the footwear company utilized a small office in Malta to significantly reduce its international tax obligations. The report, published by The New York Times, claims Crocs funneled over $3 billion in valuable patents and intellectual property into a Maltese subsidiary after acquiring HeyDude in 2022.
By shifting trademarks and implementing intercompany loan interest charges, Crocs reportedly slashed its 2023 tax liability by $218.6 million, according to Maltese financial filings cited in the report. Tax law experts have warned that such offshore structures, particularly those lacking clear "economic substance," are facing aggressive audits from the Internal Revenue Service.
The news has caused unease among investors, with potential legal exposure and back-tax liabilities raising concerns about future profit margins. Crocs shares experienced a notable decline of 3.46% on Wednesday afternoon, trading at $136.31, though still near their 52-week high.