Not my suggestion, I got this one from the TaxProf Blog in the USA:
Google Norway does its best to avoid paying Norwegian taxes, but is this illegal?
The Norwegian newspaper Dagens N?¶ringsliv reports today that Google does its best to avoid paying taxes to the Norwegian government.
Google Norway had an official turnover of NOK 33.6 million last year (US$ 6.2 mill). However, as Dagens N?¶ringsliv points out, that is only a fraction of the unit's real revenue. Unnamed media companies estimate that Google sold pay per click text ads in Norway for NOK 200 million last year (approximately US$ 37 mill), and is expected to generate twice as much this year. Still, last year Google Norway paid only NOK 1.5 mill in taxes.
How does Google do this? According to Dagens N?¶ringsliv the income is turned over to Google Ireland. It is Google Ireland that bills the Norwegian AdWords customers. ...
When signing up for an AdWords account anywhere in the world you may ask for your ads to appear in any territory, region, country or language. Hence you may select to have your ads presented at Google sites in Norway and Denmark and not - let's say - in the US or the UK.
Does this mean that Google in this case should be taxed by both Danish and Norwegian authorities? That would make this kind of trade extremely complicated.
If you on the other hand was selling cars in Norway and Denmark, you would definitely have to pay local taxes.
We are neither lawyers nor tax experts and are glad to leave this conundrum to the professionals.
The blog is worth looking at by the way - it also deals with allegations about Google in China.