double irish arrangement with dutch sandwich

DOUBLE IRISH ARRANGEMENT WITH DUTCH SANDWICH

Tax Avoidance Strategy

As the name suggests, it is completely legal and thus, it is tax avoidance.

Companies transfer IP to Irish subsidiary and then transfer the royalties earned to an Caribbean entity because Caribbean nations are tax havens

Popular Tech companies are the ones involved.

Eg. Google, Apple,

Setting the stage

Company incorporated in Ireland will be treated as resident in Ireland for tax purposes.

Setting the stage


Exception for a relevant company

Setting the stage


Exception for a relevant company Relevant company: Company that is

ultimately controlled by persons resident in the EU or in a country with which Ireland has concluded a double taxation treaty.

US has a double-taxation treaty with Ireland

Why Ireland

low corporate tax rate, favorable tax treaties that limit the

tax on transactions between subsidiaries,

and a well-educated and English speaking workforce.

Why Dutch

Ireland does not tax money being transferred among the EU

Neither Netherlands levy any such tax and only charges a small amount of fee for using its tax system.

This allows the royalty payments to be transferred to the first Irish company virtually tax free except of the fee charged.

Apple Inc.

Image

Apple Inc. Sets up a subsidiary in Ireland named

Apple Irish Co.

Image

Apple Inc. Sets up a subsidiary in Ireland named

Apple Irish Co. Apple Irish Co. sets up Apple Dutch

Subsidiary in Netherlands

Image

Apple Inc. Sets up a subsidiary in Ireland named Apple

Irish Co. Apple Irish Co. sets up Apple Dutch Subsidiary

in Netherlands Apple Dutch Subsidiary sets up Irish SubC Co.

in Ireland

Image

Transactions

Apple Inc. will give Intellectual Property for eg. Copyrights to Apple Irish Co.

Image

Transactions


Apple Irish Co. will give royalty fees in return.

Image

Transactions


Apple Irish Co. will give royalty fees in return.

The Apple Irish Co. will then license the intellectual property rights to Apple Dutch Subsidiary in return for some substantial royalty payments.

Image

Transactions


Apple Irish Co. will give royalty fees in return. The Apple Irish Co. will then license the

intellectual property rights to Apple Dutch Subsidiary in return for some substantial royalty payments.

Apple Dutch Subsidiary again sells the rights to Irish SubC Co. and gets payment in return

Image

Transactions


Apple Irish Co. will give royalty fees in return. The Apple Irish Co. will then license the intellectual

property rights to Apple Dutch Subsidiary in return for some substantial royalty payments.

Apple Dutch Subsidiary again sells the rights to Irish SubC Co. and gets payment in return

Irish SubC Co. will then receive income from the use of the licensed assets in countries outside the US.

Image

The transfer of the rights means that when subsidiary receives rights then it is enables to receive all income from sales and use of the intellectual property outside of Apple Inc’s home state and it will go to Irish SubC Co.

Irish SubC Co. carries out the ‘rest of the world’ operations and transfers that outside-US profit to Irish Dutch Subsidiary in the form of payment for the IP rights.

Apple Dutch Subsidiary will use their received fees to pay for their own to Apple Irish and thus, transferring the profits.

This essentially transmits the majority of income to Apple Irish Co., where it can sit tax free in an offshore tax haven like Bermuda.

How it is done

GOVERNMENT INTERVENTION

Ireland has announced that beginning in 2015, companies will have to be a tax resident to be incorporated in Ireland, so the Double Irish tax strategy will no longer work quite as well

THANK YOU

By Samyak Chaudhary

double irish arrangement with dutch sandwich

Business