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CandleFocus Glossary Editor
The Double Irish with a Dutch Sandwich is a complex tax avoidance and/or minimization agreement which has been popularly employed by multinational corporations in recent years, with the aim of lower their overall tax burden. The technique takes its name from the three jurisdictions involved in the arrangement: Ireland, the Netherlands and a third jurisdiction, usually a tax haven, to which profits can be sent for ultimate tax-free repatriation.
The technique involves first sending profits from a parent-company to a subsidiary located in Ireland, taking advantage of its relatively low 12.5% corporate tax rate. The company located in Ireland then transfers its profits to a second subsidiary located in the Netherlands, which is exempt from Irish taxes due to a double-taxation avoidance treaty between the two countries. The profits are then sent to a third subsidiary based in a tax haven such as the Cayman Islands, and since the profits are only “transferred” and not “earned” the company in the tax haven will likely not have to pay taxes on them.
This type of arrangement had been highly popular among companies, such as Apple and Google, for many years. However, enthusiasm for the technique dimmed somewhat in 2015 when legislation was passed in Ireland that effectively ended the use of the double Irish with Dutch sandwich for new tax agreements. Companies that had already established their tax structures prior to 2015, however, were still able to benefit from the old system until 2020.
A major pushback that has been mounted against such tax avoidance techniques is that it allows multinational companies to avoid contributing what would have been sizable payments to their ‘home’ countries and in turn makes it more difficult for governments to fund public services and infrastructure. Opponents of the double Irish with a Dutch Sandwich, or similar tax-avoidance techniques, often argue that companies should bear a greater share of their income taxes in order to support public works programs and reduce equality gaps caused by a lack of public revenue.
The technique involves first sending profits from a parent-company to a subsidiary located in Ireland, taking advantage of its relatively low 12.5% corporate tax rate. The company located in Ireland then transfers its profits to a second subsidiary located in the Netherlands, which is exempt from Irish taxes due to a double-taxation avoidance treaty between the two countries. The profits are then sent to a third subsidiary based in a tax haven such as the Cayman Islands, and since the profits are only “transferred” and not “earned” the company in the tax haven will likely not have to pay taxes on them.
This type of arrangement had been highly popular among companies, such as Apple and Google, for many years. However, enthusiasm for the technique dimmed somewhat in 2015 when legislation was passed in Ireland that effectively ended the use of the double Irish with Dutch sandwich for new tax agreements. Companies that had already established their tax structures prior to 2015, however, were still able to benefit from the old system until 2020.
A major pushback that has been mounted against such tax avoidance techniques is that it allows multinational companies to avoid contributing what would have been sizable payments to their ‘home’ countries and in turn makes it more difficult for governments to fund public services and infrastructure. Opponents of the double Irish with a Dutch Sandwich, or similar tax-avoidance techniques, often argue that companies should bear a greater share of their income taxes in order to support public works programs and reduce equality gaps caused by a lack of public revenue.