Double Irish Dutch Sandwich Tax Strategy

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@frudivinnie 9 жыл бұрын

Good explanation. Got a couple of points to add though. Usually the US Parent company transfers it's IP to the Irish/Bermudian corporation. In this way no royalties would need to be paid to the US (which would result there in a 35% taxed income element). Also, you do not have to deal with tricky tranfer pricing issues. Nouri, the purpose of the Opco is to collect all royalties from the subsidiaries (just makes it simpler). The point of the Dutch holdco is more sinister. If the Opco would directly pay royalties to the Irish/Bermudian company, then Ireland would levy a withholding tax on outbound royalties. Under the European Interest-Royalty Directive, royalties are exempt from withholding tax in the EU state of source, so Ireland cannot levy. The Netherlands can, under this Directive, but they do not tax royalties as such (except by special agreement). The Netherlands also do not levy a withholding tax when the royalties go to Bermuda, and of course Bermuda levies no tax (generally). So there you are.

@artemalforov7596 6 жыл бұрын

So I dont really get the purpose of Irish Opco. Would not it be more simple if there was just Dutch Opco, which would directly collect money from european operations and then transfer it as royalties to Bermuda?

@leepwc2 6 жыл бұрын

well, the royalties paid by Irish Opco are not actually transnferred to Bermuda but to another Irish sub., in effect managed by Bermuda under contractual arrangment. They don't think it financially ideal to stack all the cash in Burmud when the Irish sub is still regarded as non-taxed, so called Hybrid entity, in Ireland.

@itrustgroup4833 6 жыл бұрын

I agree you don't want to be paying royalties back to the US parent and a transfer of these rights when they have little value on disposal is the ideal solution - thereafter there are loans from the Irish/ Bermuda (or wherever the directors are based, always a zero or low tax jurisdiction) from a licenced money lending or finance company if possible to the US parent - these loans can be deep discount/ zero interest or very low interest - if the there is interest charged, provided the intermediary loan company is licenced, then usually these interest payment are tax deductible anyway for the US entity so another win for the parent entity and its shareholders/ managers, drinks for everyone! - unless you happen to be a tax payer and not a shareholder in Starbucks/ Apple etc) in the US or other industrialised country that is being denied its tax revenues

@jiyongjung8495 10 ай бұрын

Very concise and straightforward. Thanks

@MichaelWander 2 жыл бұрын

How does the Irish Bermuda Holdco get the money to shareholders without it being taxed? If it doesn’t, then it’s only a timing issue; corps are holding money offshore until a favorable tax environment. If they are spending on ops overseas/ investing etc, that is what would happen in the US as well…namely it would not be taxed if spent on business purposes.

@wojak8297 Жыл бұрын

they could lend the money back to the US corp or transfer it with capital gains buying new IP to the US corp, the US corp could then deduct those gains from losses from their research and development

@Esor86 8 жыл бұрын

thank you, and also for the additional clarifying comments!

@MoonLiteNite 3 жыл бұрын

And thus the only losers are thieves who do not get as big of a cut as they would like, nice..... Nicely explained, i knew of it, had a super basic understanding but this finished up all the details :)

@dennisborscheid4460 10 жыл бұрын

but what if we apply the cost sharing agreement principle on the first transaction between the US Parent and the Irish/Bermudian Holdco? wouldn't that make the royalty payment of the Bermudian holdco to the parent obsolete and keep the fill amount of the rolyalty payments in Bermuda?

@nmkadhim 10 жыл бұрын

So what's the purpose of the Dutch holdco and the Irish opco? It seems like they would get the same effect from just the Irish holdco.

@ghoshpaul 6 жыл бұрын

Nouri Al-Kadhim ya true... I fail to see how the dutch holding co. is advantageous in this setup? Irish subsidiary 2 could easily have paid the royalty to Irish Sub 1 with no witholding tax ... Benefits would have remained the same. Could someone please explain the use of dutch sandwich?

@leepwc2 6 жыл бұрын

well I think that royalties transferred within Ireland may be subject to Irish WHT.