Double Irish arrangement
The Double Irish Dutch Sandwich With a is a strategy for legal tax avoidance by multinational corporations, will be paid by the profits with little or no taxes.
Taking advantage of national specificities of the European tax law while profits are shifted to countries with relatively low effective tax rates. These shell companies based in tax havens. Among the various strategies of tax avoidance, this concept is considered particularly controversial. The Irish Finance Minister Michael Noonan plans the abolition of company tax without seat, making this strategy would not work.
Concept
The basic idea is to transfer by an optimized structuring of transactions within the Group taxable profits from countries with high effective tax rates in countries with low effective tax rates. Especially technology companies use this strategy to shift with the help of royalty payments for intellectual property profits in the tax jurisdictions respectively desired. So avoided as Google in 2011 tax payments in the amount of $ 2 billion ( 1.5 billion euros ).
The Double Irish principle uses two Irish companies, resulting in a part of the name results. Under Irish tax law, corporations are in Ireland only taxed when they also have their headquarters in Ireland next to the Commercial Register. Under this assumption, the first Irish company is founded as the owner of license rights for intellectual property, with their headquarters in a tax haven (such as the Cayman Islands or Bermuda ). The second, which was founded as a subsidiary of Irish companies now license payments resulting from the parent company and booked at the same time all across the company the profits earned from the use of this License. The offset against the payments with the profits of licensees will result in lower tax payments in the countries in which taxable profits are to be avoided. The resulting profit is taxed in Ireland under Irish corporate tax rate of 12.5 %.
By direct transfer from Ireland to a company in a tax haven, a withholding tax would apply in Ireland, however. This can be avoided as follows: there is an agreement that exempts royalties of taxes between Ireland and the Netherlands. By the money is first sent to the Netherlands and will be forwarded only after the remittance, are no taxes to (Dutch Sandwich).
For companies whose ultimate ownership is in the U.S., the payments between the two Irish companies are possibly not tax deductible if the structure is not attached clean. This is only achieved by the Irish company, which has its corporate headquarters in the tax haven, the parent company of other Irish company. Thus, the payments between the two companies are not observed, since these are what U.S. taxes are concerned, be considered as a unit.
Practical Example
Thus, the company pays less than 12.5 % tax. Both in the United States, where it has its headquarters, as well as in Germany, where the income was earned, would have higher taxes are paid; in the United States in the state of New York 39.62 % and 29.83% in Germany would be due.
Business
Larger companies, which operate on the Double Irish Dutch Sandwich With a principle thereof include (alphabetical order ):
- Adobe Systems
- Amazon
- Apple
- IBM
- IKEA by licensing the trademark rights to the name IKEA
- Microsoft
- Oracle
- Starbucks
- Yahoo
With the Double Irish Dutch Sandwich With a principle and other methods of control optimization international companies can keep their tax burden in Europe is very low, even if there is a large part of their profit is achieved.