Double Irish arrangement

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The double Irish arrangement is a tax avoidance strategy that 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. It relies on the fact that Irish tax law does not include US transfer pricing rules.[1] Specifically, Ireland uses territorial taxation, and hence does not levy taxes on income booked at subsidiaries of Irish companies that are outside of the state. In the late 1980s, Apple Inc. was among the pioneers in creating this tax structure.[2]


Typically, the company arranges for the rights to exploit intellectual property outside the United States to be owned by an offshore company. This is achieved by entering into a cost sharing agreement between the US parent and the off-shore company, in the terms of US transfer pricing rules. The off-shore company continues to receive all of the profits from exploitation of the rights outside the US, without paying US tax on the profits unless and until they are remitted to the US.[3]

It is called double Irish because it requires two Irish companies to complete the structure. One of these companies is tax resident in a tax haven, such as the Cayman Islands or Bermuda. Irish tax law provides that a company is tax resident where its central management and control is located, not where it is incorporated, so that it is possible for the first Irish company not to be tax resident in Ireland. This company is the offshore entity which owns the valuable non US rights that are then licensed to a second Irish company (tax resident in Ireland) in return for substantial royalties or other fees. The second Irish company receives income from use of the asset in countries outside the US, but its taxable profits are low because the royalties or fees paid to the first Irish company are deductible expenses. The remaining profits are taxed at the Irish rate of 12.5%.

For companies whose ultimate ownership is located in the United States, the payments between the two related Irish companies might be non-tax-deferrable and subject to current taxation as Subpart F income under the Internal Revenue Service's Controlled Foreign Corporation regulations if the structure is not set up properly. This is avoided by organizing the second Irish company as a fully owned subsidiary of the first Irish company resident in the tax haven, and then making an entity classification election for the second Irish company to be disregarded as a separate entity from its owner, the first Irish company. The payments between the two Irish companies are then ignored for US tax purposes.[1]

Dutch sandwich[edit]

Double Irish With a Dutch Sandwich – example
1. Advertiser pays for an ad in Germany.
2. Money goes to the subsidiary in Ireland which holds the Intellectual Property (IP).
3. Tax payable in Ireland is 12.5 per cent ... Irish company pays a royalty to another subsidiary in The Netherlands, for which it gets a tax deduction.
4. And the Dutch company pays the money to another subsidiary in Ireland ... with no withholding tax payable on inter-EU transactions.
* And the last company pays no tax because it is controlled outside Ireland, in Bermuda.

The addition of a Dutch sandwich to the double Irish scheme further reduces tax liabilities. Ireland does not levy withholding tax on certain receipts from European Union member States. Revenues from income of sales of the products shipped by the second Irish company are first booked by a shell company in the Netherlands, taking advantage of generous tax laws there. Overcoming the Irish tax system, the remaining profits are transferred directly to Cayman Islands or Bermuda. Thus if the two Irish holding companies are thought of as "bread" and the Netherlands company as "cheese", this scheme is referred to as the "Dutch sandwich".[4][5] The Irish authorities never see the full revenues and hence cannot tax them, even at the low Irish corporate tax rates. There are equivalent Luxembourgish and Swiss sandwiches.

Companies using the arrangement[edit]

Major companies known to employ the double Irish strategy are:


In 2010, the Obama administration was said to propose to tax excessive profits of offshore subsidiaries as a curb on tax avoidance.[9] A 2010 law brought Ireland into line with most of its trading partners by introducing a formal regime requiring companies' intra-group transfer prices to be similar to those that would be charged to independent entities. The first deadline for corporate tax submissions under the new rules was September 2012.[13] In 2013, the Irish government announced that companies will no longer be able to incorporate in Ireland without also being tax resident there, a measure intended to counter arrangements similar to the Double Irish. It is proposed to take effect in January 2015.[14]


Companies such as Google, Oracle and FedEx are declaring fewer of their ongoing offshore subsidiaries in their public financial filings, which has the effect of reducing visibility of entities declared in known tax havens.[15]


  1. ^ a b Joseph B. Darby III, International “Tax Planning: Double Irish More than Doubles the Tax Saving”, Practical US/International Tax Strategies 11(9), 15 May 2007
  2. ^ a b Charles Duhigg (28 April 2012). "How Apple Sidesteps Billions in Global Taxes". New York Times. Retrieved 29 April 2012. "In the late 1980s, Apple was among the pioneers in creating a tax structure – known as the Double Irish – that allowed the company to move profits into tax havens around the world ..." 
  3. ^ Wiederhold, Gio: "Follow the Intellectual Property: How companies pay Programmers when they move the related IP rights to offshore taxhavens?"; Communications of the ACM, vol. 54 no. 1, January 2011, pp. 66–74.
  4. ^ "'Dutch Sandwich' saves Google and many other U.S. companies billions in taxes". MSNBC. 22 October 2010. 
  5. ^ "Man Making Ireland Tax Avoidance Hub Proves Local Hero"
  6. ^ "Abbott Laboratories Irish subsidiary paid no tax on €1.8 billion profit". The Irish Times. 31 May 2013. 
  7. ^ "Abbott subsidiaries paid no tax on €2.9 billion profits". Slido Today. 
  8. ^ a b c d e f g Chitum, Ryan (2007). "How 60 billion are lost in tax loopholes", Bloomberg.
  9. ^ a b c d e f Drucker, Jesse (21 October 2010). "Google 2.4% Rate Shows How $60 Billion Lost to Tax Loopholes – Bloomberg". 
  10. ^ "How Google saved $2 billion in income tax – Times of India". 11 December 2012. 
  11. ^ "IBM gooses its sales numbers thanks to overseas tax tricks". ARS Technica. 4 February 2014. 
  12. ^ "Corporate Tax 2014: Yahoo! joins "Double Irish Dutch Sandwich" club; IDA Ireland wants more members". FinFacts Ireland. 10 February 2014. 
  13. ^ "Ireland boosting capacity to track transfer pricing". Reuters. 29 May 2013. 
  14. ^ Irish Budget abolishes corporate tax avoidance schemes, European Tribune; October 15th, 2013
  15. ^ From Google to FedEx: The Incredible Vanishing Subsidiary

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