Double Irish With a Dutch Sandwich

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The Double Irish with a Dutch Sandwich ( German:  two Irish companies with a Dutch company in between ) is a tax avoidance strategy for multinational corporations , which means that little or no tax has to be paid on profits . The legality of the method is disputed.

General

Using national peculiarities of European tax law , profits are shifted to countries with comparatively low effective tax rates ( low tax countries ). To this end, mailbox companies are established in tax havens . This concept is particularly controversial among the various tax avoidance strategies. Irish Treasury Secretary Michael Noonan plans to get rid of tax-free companies , which would make this strategy no longer work.

As of 2015, MNEs will no longer be able to register in Ireland without paying tax there. Those who are already profiting will, however, have a transition period until 2020, explained the Irish Finance Minister on October 14, 2014. From 2015, all companies registered in Ireland must also have their tax domicile in Ireland.

concept

The basic idea is to transfer taxable profits from countries with high effective tax rates to countries with low effective tax rates through an optimized structuring of the transactions within the group. Technology companies in particular use this strategy to shift profits to the tax jurisdictions they want with the help of license payments for intellectual property . For example, Google avoided tax payments of $ 2 billion in 2011.

The Double Irish principle uses two Irish companies, from which part of the name results. Under Irish tax law are corporations only taxed in Ireland if this addition to the commercial register and its corporate headquarters are in Ireland. With this in mind, the first Irish company to own intellectual property rights will be set up with its headquarters in a tax haven (such as the Cayman Islands or Bermuda ). The second Irish company, founded as a subsidiary , now pays license payments to the parent company and at the same time books all company-wide profits from the use of these license rights. The fact that the payments can be offset against the profits of the licensees leads to lower tax payments in the countries in which taxable profits are to be avoided. The resulting Irish profit will be taxed at the Irish corporate tax rate of 12.5%.

However, a direct transfer from Ireland to a company in a tax haven would incur withholding tax in Ireland . This can be avoided as follows: There is an agreement between Ireland and the Netherlands that exempts license fees from taxes. By the money will first be transferred to the Netherlands and will be forwarded only after the remittance, no tax is payable ( English Dutch Sandwich ).

For companies whose ultimate ownership is in the US, payments between the two Irish companies may not be tax deductible if the structure is not properly assembled. This is only achieved by the fact that the Irish company, which is based in the tax haven, is the parent company of the other Irish company. As a result, the payments between the two companies are ignored, as they are then treated as a unit for US taxes .

Practical example

Graphic showing the sequence of the “Double Irish With a Dutch Sandwich”.
  1. An American company from New York earns money in Germany.
    If this would generate a profit , this would have to be taxed.
  2. Part of the income is paid by Germany as a license fee to a subsidiary in Ireland.
    The taxable profit in Germany is thereby reduced and the Irish tax rate, which is more favorable than in Germany, would apply.
  3. The Irish subsidiary pays the money as royalties to another subsidiary in the Netherlands.
    This will reduce Irish taxable profits and an additional tax break will reduce Irish tax charges of 12.5%.
  4. The Dutch subsidiary pays the money to a second Irish subsidiary.
    As it is an intra-European transaction, there are no withholding taxes. The second Irish subsidiary pays no tax as it is just a branch of a company headquartered in Bermuda.

Thus the company pays less than 12.5% ​​tax. Both in the United States , where it is headquartered, and in Germany, where the income is generated, higher taxes would have to be paid; in the United States in New York state it would be 39.62% and in Germany 29.83%.

Companies

Larger companies that work on the double-Irish-with-a-Dutch-sandwich principle are among others. a. (alphabetical order):

With the double-Irish-with-a-Dutch-sandwich principle and other methods of tax optimization, international companies can keep their tax burden very low in Europe, even if a large part of their profit is generated there.

Individual evidence

  1. ↑ EU: Ireland's tax rules for Apple are probably not legal. In: FAZ net . September 30, 2014, accessed October 7, 2014 .
  2. ↑ Marlies Uken: The hunt for the stateless billions. In: Zeit Online . November 28, 2012, accessed December 14, 2012 .
  3. ↑ Noonan cracks down on 'stateless' companies registered in Ireland for tax. In: The Journal.ie. October 15, 2013, accessed October 20, 2013 .
  4. ↑ Tax policy: Ireland closes tax loophole for companies , Zeit Online, October 14, 2014
  5. ↑ Jesse Drucker: Google is diverting sales into the tax haven and saving billions. In: The world . December 12, 2012, accessed December 16, 2012 .
  6. ^ Double Irish With a Dutch Sandwich. In: New York Times . April 28, 2012. Retrieved December 15, 2012 .
  7. ↑ Cantillon: IMF bites 'Double Irish Dutch Sandwich'. In: The Irish Times. October 10, 2013, accessed October 20, 2013 .
  8. ↑ Corporate taxation 2011 in an international comparison. In: The most important taxes in an international comparison (Figure 3). Federal Ministry of Finance , June 21, 2012, accessed on July 4, 2013 .
  9. ^ Samuel S. Kang and Tuan Ngo: Tax Avoidance in Silicon Valley, and How America's Richest Company Pays a Lower Tax Rate than You Do. Retrieved October 24, 2016 .
  10. ↑ The tax tricks from Apple and Amazon. In: Hamburger Abendblatt . November 26, 2012, accessed December 15, 2012 .
  11. ↑ Google smuggled 20 billion euros from Europe to Bermuda. In: Spiegel Online. January 4, 2019, accessed January 4, 2019 .
  12. ↑ Report: IBM gooses its sales numbers thanks to overseas tax tricks
  13. ↑ Hannes Gamillscheg: IKEA founder accused of tax evasion: Billions in the tax haven. (No longer available online.) In: Frankfurter Rundschau. January 27, 2011, archived from the original on June 24, 2011 ; Retrieved May 21, 2013 .
  14. ^ Sibylle Haas, Gunnar Herrmann: Cashed in cheaply. In: Süddeutsche.de. August 12, 2010, accessed May 21, 2013 .
  15. ↑ Where the fun ends - The dark side of LEGOLAND, SEA LIFE and Co. (No longer available online.) In: ZDFzoom. August 20, 2014, archived from the original on December 3, 2016 ; Retrieved September 24, 2014 .
  16. ^ Corporate Tax 2014: Yahoo! joins “Double Irish Dutch Sandwich” club; IDA Ireland wants more members , on finfacts.ie
  17. ↑ Sven Böll, Markus Dettmer, Frank Dohmen, Christoph Pauly, Christian Reiermann: Sandwich from Holland. Der Spiegel, November 12, 2013, accessed October 25, 2013 .