double irish arrangement with dutch sandwich
TRANSCRIPT
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
Company incorporated in Ireland will be treated as resident in Ireland for tax purposes.
Exception for a relevant company
Setting the stage
Company incorporated in Ireland will be treated as resident in Ireland for tax purposes.
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.
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Apple Inc. Sets up a subsidiary in Ireland named
Apple Irish Co.
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Apple Inc. Sets up a subsidiary in Ireland named
Apple Irish Co. Apple Irish Co. sets up Apple Dutch
Subsidiary in Netherlands
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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
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Transactions
Apple Inc. will give Intellectual Property for eg. Copyrights to Apple Irish Co.
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Transactions
Apple Inc. will give Intellectual Property for eg. Copyrights to Apple Irish Co.
Apple Irish Co. will give royalty fees in return.
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Transactions
Apple Inc. will give Intellectual Property for eg. Copyrights to Apple Irish Co.
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.
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Transactions
Apple Inc. will give Intellectual Property for eg. Copyrights to Apple Irish Co.
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 Inc. will give Intellectual Property for eg. Copyrights to Apple Irish Co.
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.
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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