http://personalmoneystore.com/moneyblog/2010/12/28/dutch-sandwich/http://www.npr.org/blogs/money/2010/10/21/130727655/google-s-tax-tricks-double-irish-and-dutch-sandwich How to make a Dutch Sandwich
The Dutch Sandwich is a complicated business tax structure scheme Google has used to avoid paying $3.1 billion in taxes since 2007. To make a Dutch Sandwich, a U.S. parent company transfers overseas profits to an incorporated holding company in Ireland. The Irish holding company just happens to be a tax resident in Bermuda. Sending the money directly to Bermuda from there would incur a hefty tax. Therefore it takes a detour through a Netherlands shell company, because the Netherlands has no tax on royalties. Ireland doesn’t tax the Dutch payment, because it is made to a company in the European Union. The Dutch shell company then transfers the money to Bermuda, where there is no corporate income tax.
Google eats the IRS for lunch
Google’s Dutch Sandwich helps shave its tax rate down to about 2.4 percent. The U.S. corporate tax rate is 35 percent. The corporate tax rate in the U.K, Google’s second-largest market, is 28 percent. To protect its overseas profits from those tax rates, Google licenses its advertising and search technology to Google Ireland. The licensing fee is ridiculously low because the revenues are taxed at the 35 percent U.S. corporate rate. This dollop of mayo on the Dutch Sandwich is called “transfer pricing.” The IRS considers transfer pricing legal, if a company has enough lawyers.
http://www.dilbert.com/strips/2010-12-28/
