Dutch Sandwich

A Dutch Sandwich is a tax avoidance strategy that some multinational corporations use to lower their corporate tax liability.^[1] The strategy uses payments between related entities in a corporate structure to shift income from a higher-tax country to a lower-tax country.^[2]

In a Dutch Sandwich, revenues from sales of a product shipped by an Irish company is booked by a shell company in the Netherlands,^[3] taking advantage of generous tax laws there.^[4] This is usually the second part of the scheme is referred to as the "Double Irish with Dutch Sandwich".^[5]^[6] The remaining profits are transferred directly to Cayman Islands or Bermuda, known as a Bermuda Black Hole.

For example, Google's main operating company is based in Ireland. Google's tax structure involves six territories, resulting in overall payment of just 2.4% tax on all operations outside the United States. To avoid paying income taxes in Ireland, it transfers the profits out of the jurisdiction. Ireland has a high tax on such transfers to a tax haven jurisdiction like Bermuda, so the profits are transferred to the Netherlands, easily done as an EU co-member. From there the profits can be transferred to Bermuda, at little cost, which has no corporate income tax. In 2009, Google reported a gross profit of €5.5bn, but an operating profit of €45m after subtracting "administrative expenses" of €5.467bn. Administrative expenses comprised mainly royalties or a licence fee which Google pays its Bermuda headquarters for the right to operate.^[7]

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Dutch Sandwich

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