Tag: Double Irish Dutch sandwich

A Double Irish Dutch sandwich is a much used tax avoidance scheme involving Ireland, the Netherland and a Caribbean island like the Caymans or Bermuda.
First a company registered in Ireland (Irish One Ltd), acquires IP right, which will be utilised by subsidiaries or partners of the US Company worldwide. There are various arrangements, how Irish One Ltd can get the IP right at a price much lower than it may be worth on the basis of the actual revenue it is likely to generate, e.g. Irish One Ltd concludes a cost sharing or an R&D agreement with the US company, which is doing the actual development of the IP right, and thus Irish One Ltd acquires the IP right at around cost price.
Then Irish One Ltd licenses its IP right to a Dutch tax resident company (“Dutch BV”). Dutch BV then sublicenses the IP to a 100% subsidiary of Irish One Ltd also registered in Ireland (“Irish Two Ltd”), which collects the royalties from all over the world.
Irish Two Ltd. sends the royalties to the Dutch BV, which will forward it to Irish One Ltd. Irish Two Ltd and Dutch BV keep only a tiny part of the royalties collected, which covers their cost of operation and a small profit.
Finally the management of Irish One Ltd is located in a small sunny Caribbean island like the Caymans or Bermuda.
Taxation
According to Irish tax legislation, a company is tax resident in the country, where it’s central management is located – even if the company itself is registered under Irish law. As Irish One Ltd’s place of management is located outside Ireland, the company will not be tax resident in Ireland, and therefore, will not have to pay any tax there.
The Caribbean islands rarely impose profit based taxes, but rather collects a fixed few hundred USD per annum from their resident companies. Thus, most of the royalties collected through the structure can be accumulated without any substantial taxation in Irish One Ltd.
The double tax treaty network of Ireland strongly limits source countries’ rights to tax royalties paid to Irish companies. As opposed to this, these source countries rarely have any double tax treaty with Caribbean Islands. Therefore, paying royalties to an Irish company rather than to one in the Caribbeans can save substantial withholding tax in the countries, where the royalties are paid from.
The Double Duch Irish Sandwich is also advantageous from the perspective of certain controlled foreign company rules in the United States.

Apple - Taxes and Transfer Pricing

Apple – Taxes and Transfer Pricing

Apple’s tax affairs have been in the spotlight of tax authorities for decades – and still are! Settlements have been entered with numerous European Countries, among others – Italy, the UK and France. Apple has also been investigated by the EU and a State Aid ruling was issued in August 2016. According to the ruling “Ireland granted illegal tax benefits to Apple” and the European Commission ordered Apple to pay €13 billion, plus interest, in unpaid Irish taxes from 2004–14 to the Irish state. U.S. Senate scrutiny of Apple Inc.’s tax strategies back in 2009 turned the spotlight on a stateless entity with $30 billion in profit since 2009 that’s incorporated in Ireland, controlled by a board in California, and didn’t pay taxes in either place ... Continue to full case
Denmark vs Microsoft Denmark, March 2018, Danish National Court, SKM2018.416.ØLR

Denmark vs Microsoft Denmark, March 2018, Danish National Court, SKM2018.416.ØLR

The Danish Tax Ministry and Microsoft meet in Court in a case where the Danish tax authorities had issued an assessment of DKK 308 million. The Danish tax authorities were of the opinion that Microsoft had not been properly remunerated for performing marketing activities due to the fact that OEM sales to Danish customers via MNE OEM’s had not been included in the calculation of local commissions. In court, Microsoft required a dismissal with reference to the fact that Sweden, Norway and Finland had either lost or resigned similar tax cases against Micorosoft. The National Court ruled in favor of Microsoft. The decision has now been appealed to the Supreme Court by the Danish tax ministery. Click here for translation DK vs MS Marketing-and Sales Commissioner ... Continue to full case
Google - Taxes and Transfer Pricing

Google – Taxes and Transfer Pricing

Google’s tax affairs are back in the spotlight after filings in the Netherlands have showed that billions of dollars were moved to Bermuda in 2016 using the “double Irish Dutch sandwich”. According to the Washington Post, Google’s cash transfers to Bermuda reached $27b in 2016. Google uses the double Irish Dutch sandwich structure to shield the majority of it’s international profits from taxation. The setup involves shifting revenue from one Irish subsidiary to a Dutch company with no employees, and then on to a Bermuda-mailbox owned by another company registered in Ireland. US According to US filings, Google’s global effective tax rate in 2016 was 19.3%. New US tax law will give companies such as Google an incentive to repatriate much of that cash by offering them a “one-time”, 15.5% tax rate on offshore funds. After that, foreign earnings will be taxed at 10.5%, with companies allowed to deduct foreign tax liabilities from this amount. The law will also impose ... Continue to full case
Africa - Mining and Transfer Pricing

Africa – Mining and Transfer Pricing

Most Sub Saharan African jurisdictions see the area of mineral transfers/sales as the main transfer pricing risk, but only few have systems in place to check if prices applied to minerals transferred to related parties comply with the arm’s length principle. Studies highlights a strong need for capacity strengthening in the area of transfer pricing throughout the African continent and for enhancing the knowledge of mining industry within tax authorities. South Africa has, for many years, been the leader in transfer pricing audits among the African countries. But emerging countries such as Nigeria, Ghana, Kenya, Tanzania, Mozambique, are now making a concerted effort to develop transfer pricing capability. In Tanzania, for example, the Acasia Mining Plc. was recently  issued a USD 190 billion tax bill. The assessment demonstrates a strong political will in Africa to address transfer pricing non-compliance. A paper commissioned by the World Bank highlights transfer pricing issues within the African Mining industry. Not surprisingly, it seems that most of the transfer pricing problems relates ... Continue to full case