What is the Double Irish Dutch Sandwich?
The Double Irish Dutch Sandwich is a tax avoidance technique some multinational corporations use to reduce their corporate tax rates. The method involves setting up two Irish and one Dutch subsidiary to shift profits to low-tax or no-tax jurisdictions.
Some additional information that might be helpful are:
- The first Irish subsidiary is registered in a tax haven, such as Bermuda or the Cayman Islands, and holds the corporation’s intellectual property rights. The second Irish subsidiary pays royalties to the first Irish subsidiary for using the intellectual property rights and thus reduces its taxable income in Ireland.
- The second Irish subsidiary then transfers its profits to the Dutch subsidiary, which acts as an intermediary. The Dutch subsidiary pays little or no tax on the profits and then sends them back to the first Irish subsidiary in the tax haven. This avoids the Irish withholding tax on dividends that would otherwise apply.
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- The technique exploits the loopholes in the Irish and Dutch tax laws and the European Union directives that allow tax-free payments of royalties and dividends between EU member states.
- Various governments and organizations have criticized the technique for eroding the tax base and creating unfair competition. Ireland has introduced measures to close the loopholes and end the use of the method by 2020.
Does the Double Irish Dutch sandwich still work?
The Irish Dutch double sandwich was eventually outlawed by the European Commission in 2014. However, it is still controversial, and some argue that it should be allowed.