The double Irish with a Dutch sandwich is a tax evasion system used by a particular or huge business firm, implicating the use of both Irish and Dutch subsidiary companies to change the profits to a lower tax or no-tax jurisdictions.
This method or system of operation has created a tax reduction and made it achievable for several business corporations to downgrade their entire corporate tax rates systematically.
This article will focus on the double Irish with a Dutch sandwich is a tax avoidance method often used by several huge corporations.
The system includes propelling and distribution of profits primarily through a single Irish company, later to a Dutch company, and thereafter to another different Irish company headquartered in a tax haven.
Also in the concept of a Dutch sandwich, the legislation and operation were approved in Ireland in 2015. This approval terminated the use of the tax scheme for any new tax plans.
To cope with this, companies with established business structures were capable of gaining from the old system until the fiscal year of 2020.
Double Irish with a Dutch Sandwich can be properly understood from the detailed explanation below;
The double Irish with a Dutch sandwich is a group of comparable international tax avoidance schemes. It includes the arrangement of business transactions among subsidiary companies that may desire to benefit or take advantage of the eccentricities in different national tax codes.
These practices are used by technological companies that understand the dynamics of double Irish. For instance, a company or firm can simply change huge portions of profits to countries simply by the transmission of beneficial property rights to other subsidiaries abroad.
The double Irish with a Dutch sandwich is generally seen to be a hostile tax planning approach mostly used by some of the world’s largest corporations.
Precisely in 2014, the system was under demanding scrutiny, particularly from the U.S. and the European Union. This demand created a bridge for the exposure that this practice simplified the transfer of several billion dollars annually tax-free to tax havens.
Special Considerations of Double Irish with a Dutch Sandwich
Most times, consideration can be given to a large business experiencing international stress and the publicity surrounding the use of double Irish with a Dutch sandwich. In this case, the Irish finance minister previously approved laid down measures to carefully close the loopholes in the 2015 budget analysis.
Also, the legislation successfully and effectively ended the usage of any tax scheme or system of tax for new tax plans.
The necessities for Double Irish with a Dutch Sandwich
The first Irish company proposed to obtain a huge amount of royalties from sales offered for sales to U.S. consumers.
The U.S. profits and taxes are systematically lessened and the Irish taxes on the royalties dropped over time still become very low.
Therefore, owing to a gap in Irish laws, the business could make a transfer urgently to its profits tax-free to the offshore company. This process made the company remain untaxable for several years.
Furthermore, the second Irish company where the transfer is made is primarily used for sales to European customers.
The company is also taxed but at a reduced rate and had the privilege to get its profits across to the initial Irish company using a Dutch company as an intermediary. When the process can be followed legally unnecessary tax measures are suspended over time.
The advantage that the first Irish company has is that the entire wealth can be sent onward to the company in the tax haven without further restrictions.
Let’s look at an illustration
Example of the Double Irish with a Dutch Sandwich
Research shows that in the fiscal year of 2017, Google officially reportedly transferred over nineteen billion euros precisely 19.9 billion euros and estimation reveals that approximately twenty-two ($22) billion dollars through a Dutch company, and over time, it was advanced to an Irish company located in Bermuda where there is no taxable payment.
Google’s subsidiary in the Netherlands has been primarily used for the transmission of revenue to the Irish subsidiary in Bermuda as companies are not entitled to taxes in Bermuda.