What Is the Double Irish With a Dutch Sandwich?
Let me explain to you what the double Irish with a Dutch sandwich really is. It's a tax avoidance technique that some large corporations use, combining Irish and Dutch subsidiary companies to move profits to places with low or no taxes. This setup has let these companies slash their overall corporate tax rates significantly.
Key Takeaways
You should know that the double Irish with a Dutch sandwich is a tax avoidance method used by big corporations. The process sends profits first through one Irish company, then to a Dutch company, and finally to a second Irish company based in a tax haven. Remember, Ireland passed laws in 2015 that ended this for new tax plans, but companies with existing setups could keep using it until 2020.
Understanding Double Irish With a Dutch Sandwich
I want you to understand that the double Irish with a Dutch sandwich is one of many similar international tax avoidance schemes. Each one sets up transactions between subsidiaries to exploit quirks in different countries' tax codes.
Tech companies use these techniques the most because they can easily move big chunks of profits overseas by giving intellectual property rights to foreign subsidiaries.
This strategy is seen as an aggressive tax planning move by some of the biggest corporations out there. Back in 2014, it got a lot of attention and criticism from the U.S. and the European Union when people found out it was moving billions of dollars tax-free to tax havens every year.
Special Considerations
Due to pressure from around the world and all the publicity, the Irish finance minister included measures in the 2015 budget to close these loopholes. This legislation stops the use of the scheme for any new tax plans. If companies already had structures in place, they could continue benefiting until 2020.
Requirements for Double Irish With a Dutch Sandwich
Here's how it works: The first Irish company gets large royalties from sales to U.S. customers. This cuts down U.S. profits and taxes a lot, and the Irish taxes on those royalties are very low. Thanks to a loophole in Irish law, the company can then move those profits tax-free to an offshore company, where they sit untaxed for years.
The second Irish company handles sales to European customers. It's taxed at a low rate too and sends its profits to the first Irish company via a Dutch company in between. If you do it correctly, no taxes get paid anywhere. Then, the first Irish company has all the money and can forward it to the tax haven company.
Example of the Double Irish With a Dutch Sandwich
Take 2017, for instance: Google reportedly moved 19.9 billion euros, about $22 billion, through a Dutch company, which then went to an Irish company in Bermuda. There are no taxes in Bermuda. Essentially, Google's Dutch subsidiary transferred revenue to the Irish one in Bermuda, avoiding taxes entirely.
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