Dutch Sandwich

Dutch Sandwich is a base erosion and profit shifting (BEPS) corporate tax tool, used mostly by U.S. multinationals to avoid incurring European Union withholding taxes on untaxed profits as they were being moved to non-EU tax havens (such as the Bermuda black hole). These untaxed profits could have originated from within the EU, or from outside the EU, but in most cases were routed to major EU corporate-focused tax havens, such as Ireland and Luxembourg, by the use of other BEPS tools. The Dutch Sandwich was often used with Irish BEPS tools such as the Double Irish, the Single Malt and the Capital Allowances for Intangible Assets ("CAIA") tools. In 2010, Ireland changed its tax-code to enable Irish BEPS tools to avoid such withholding taxes without needing a Dutch Sandwich. Tax haven#Top 10 tax havens The structure relies on the tax loophole that most EU countries will allow royalty payments be made to other EU countries without incurring withholding taxes. However, the Dutch tax code allows royalty payments to be made to several offshore tax havens (like Bermuda), without incurring Dutch withholding tax. The Dutch Sandwich therefore behaves like a "backdoor" out of the EU corporate tax system and into un-taxed non-EU offshore locations. These royalty payments require the creation of intellectual property ("IP") licensing schemes, and therefore the Dutch sandwich is limited to specific sectors that are capable of generating substantial IP. This is most common in the technology, pharmaceutical, medical devices and specific industrial (who have patents) sectors. Its creation is generally attributed to Joop Wijn (State Secretary of Economic Affairs in May 2003) after lobbying from U.S. tax lawyers from 2003 to 2006. [When] former venture-capital executive at ABN Amro Holding NV Joop Wijn becomes State Secretary of Economic Affairs in May 2003 [, ... it's] not long before the Wall Street Journal reports about his tour of the US, during which he pitches the new Netherlands tax policy to dozens of American tax lawyers, accountants, and corporate tax directors.