Dutch Sandwich

A Dutch Sandwich is a tax avoidance strategy that some multinational corporations use to lower their corporate tax liability. The strategy uses payments between related entities in a corporate structure to shift income from a higher-tax country to a lower-tax country.

In a Dutch Sandwich, revenues from sales of a product shipped by an Irish company is booked by a shell company in the Netherlands, taking advantage of generous tax laws there. This is usually the second part of the scheme is referred to as the "Double Irish with Dutch Sandwich". The remaining profits are transferred directly to Cayman Islands or Bermuda, known as a Bermuda Black Hole.

For example, Google's main operating company is based in Ireland. Google's tax structure involves six territories, resulting in overall payment of just 2.4% tax on all operations outside the United States. To avoid paying income taxes in Ireland, it transfers the profits out of the jurisdiction. Ireland has a high tax on such transfers to a tax haven jurisdiction like Bermuda, so the profits are transferred to the Netherlands, easily done as an EU co-member. From there the profits can be transferred to Bermuda, at little cost, which has no corporate income tax. In 2009, Google reported a gross profit of €5.5bn, but an operating profit of €45m after subtracting "administrative expenses" of €5.467bn. Administrative expenses comprised mainly royalties or a licence fee which Google pays its Bermuda headquarters for the right to operate.

See also

• Tax exporting
• Tax inversion
• Singapore Sling