Double Irish-Dutch Tax Sandwich (Part 1 of 2)


May’s newsletter described how Apple, Inc. games the U.S. tax system by using a foreign tax strategy called a “sandwich.” The Double Irish-Dutch Tax Sandwich is an international tax-planning device used by many international companies to transfer taxable income outside the United States. It is prevalent in Ecommerce because sales derive from computer downloads and the physical location of the computer can be anywhere in the world. In general, the global system of taxation is based on the seller’s physical location, so by shifting the location to a low-tax country, the seller avoids taxes. Currently, the countries of choice are Ireland and the Netherlands for the reasons described below.


Ireland enacted several quirky laws to attract foreign companies; however, these laws have been exploited, in unintended ways, by multi-national companies to avoid the U.S. and many European tax systems. The following Irish laws are used to design the Double Irish-Dutch Tax Sandwich:

  1. Irish taxes corporate profits at 12.5%, less than half of the tax rate in the U.S. and many European economies.
  2. Under international law, a corporation is a tax resident of the county where it incorporates; however, under Irish law, a corporation is a tax resident where its managers reside. Thus, a company can incorporate and operate in Ireland, but if its management is located in a tax haven, such as Bermuda, the company is considered a resident of Bermuda for Irish tax purposes.1
  3. Income earned in Ireland, but paid to a company in another country is subject to Irish withholding taxes of 20%, however this rule is inapplicable if the company receiving payment is a European Economic Community member..
  4. An “unlimited liability company” does not have to disclose financial information such as balance sheets or income statements.


The Netherlands extracts a nominal tax on the royalty income, essentially a fee for using the Dutch tax system in this manner. In fact, the Rolling Stones and U2 have shifted their world-wide business operations to the Netherlands to exploit this loophole.

See my newsletter “Tax Haven for Rock Stars.

End of Part 1

1 The U.S. tax system treats the company as Irish, because it was incorporated there. This disconnect between taxing systems is exploited by the multi-nationals to avoid taxes in both jurisdictions.

Print Friendly, PDF & Email