Double Irish With A Dutch Sandwich
The double Irish with a Dutch sandwich is a tax avoidance technique employed by certain large corporations, involving the use of a combination of Irish and Dutch subsidiary companies to shift profits to low or no-tax jurisdictions. The technique has made it possible for certain corporations to reduce their overall corporate tax rates dramatically.
Double Irish with a Dutch Sandwich
Definition
The Double Irish with a Dutch Sandwich is a tax avoidance technique used by some large corporations. It involves using a combination of Irish and Dutch subsidiaries to shift profits to low or no-tax jurisdictions, significantly reducing the overall corporate tax rate.
Origin
This tax strategy originated in the 1980s when some multinational companies began exploiting loopholes in Irish and Dutch tax policies to reduce their tax burdens. Ireland's low corporate tax rate and the Netherlands' lenient tax regulations made this strategy feasible.
Categories and Characteristics
The Double Irish with a Dutch Sandwich primarily consists of two parts: the Double Irish structure and the Dutch Sandwich structure. The Double Irish structure involves two Irish subsidiaries, one registered in Ireland but operating in a low or no-tax jurisdiction, and the other operating locally in Ireland. The Dutch Sandwich structure inserts a Dutch subsidiary between the two Irish subsidiaries, further reducing the tax burden through the Netherlands' tax benefits.
Specific Cases
Case 1: A major tech giant set up two subsidiaries in Ireland, one operating locally and the other registered in Bermuda but operating in Ireland. Through internal transactions and royalty transfers, the company shifted most of its profits to Bermuda, significantly lowering its global tax burden.
Case 2: A pharmaceutical company used the Double Irish with a Dutch Sandwich structure to transfer its European market profits through a Dutch subsidiary to a low-tax Irish subsidiary, and then through royalty payments to the Cayman Islands, reducing its tax burden in Europe.
Common Questions
1. Is this tax strategy legal?
Answer: While this strategy is legally permissible, it has come under strict scrutiny and restrictions by governments and international organizations in recent years.
2. Why is this strategy called the 'Double Irish with a Dutch Sandwich'?
Answer: Because it involves two Irish subsidiaries and one Dutch subsidiary, forming a structure similar to a sandwich.
