What is a Double Irish and Dutch Sandwich? Double Irish and Dutch Sandwich Review

According to Irish policy, if a company is headquartered outside of Ireland and actually operates outside of Ireland, the company's branch in Ireland enjoys a zero tax rate and does not need to pay tax on remittances to the company's headquarters. Companies that actually operate in Ireland need to pay a 12.5% ​​corporate income tax rate. In addition, according to Dutch tax policy, companies trading within the EU do not need to pay corporate income tax, but only need to pay a low transaction tax.

Generally, American multinational companies will adopt the following measures to avoid taxes. First, they will set up a company A that actually operates in Ireland, and attribute the income outside the United States to A as A's operating income. At the same time, they will also set up company B in Ireland and company C in the Netherlands. The headquarters of B is located in a tax haven in the Caribbean. The company assigns the intellectual property rights of all products to company B, which then authorizes it to C, and C then authorizes it to A. Once A has operating income, it must pay the income to C as royalties. At the same time, the royalties paid by A can also be used as company operating costs to deduct certain taxes. C then pays royalties to B. B then remits the income to the company's headquarters account. If B directly authorizes A, B will be considered to actually operate in Ireland, so American multinational companies will choose to open company C in the Netherlands. Companies A and B in Ireland are like the two slices of bread in a sandwich, and Dutch company C is like the sandwich in the sandwich, so this tax avoidance method is called a double Irish sandwich with a Dutch sandwich.

Through the operation of the three companies, the overseas income tax rate of American multinational corporations is only about 2-3%, while if the overseas income is remitted back to the United States, at least 35% federal corporate tax rate must be paid.

Due to excessive tax avoidance, under external pressure, American multinational companies such as Apple, Google, and Facebook gradually abandoned this tax avoidance method in January 2020. Governments of various countries plan to set a global minimum corporate tax rate to reduce tax avoidance by multinational companies.

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