Double Irish arrangement
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 U.S. transfer pricing rules. 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.
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 U.S. parent and the off-shore company, in the terms of U.S. transfer pricing rules. The off-shore company continues to receive all of the profits from exploitation of the rights outside the U.S., without paying U.S. tax on the profits unless and until they are remitted to the U.S.
It is called double Irish because it requires two Irish companies to complete the structure. The first Irish company is the offshore company which owns the valuable non U.S. rights. This company 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. The first Irish company licenses the rights to a second Irish company, which is tax resident in Ireland, in return for substantial royalties or other fees. The second Irish company receives income from exploitation of the asset in countries outside the U.S., 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 U.S. tax purposes.
Dutch sandwich 
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. Funds needed for production costs incurred in Ireland are transferred there, the remaining profits are transferred to the first Irish company in the Cayman Islands or Bermuda. 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". 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 
Major companies known to employ the double Irish strategy are:
The White House proposed to tax excessive profits of offshore subsidiaries as a curb on income shifting.
- 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
- Charles Duhigg (28 April 2012). "How Apple Sidesteps Billions in Global Taxes". New York Times. Retrieved 2012-04-29. "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 ..."
- 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.
- "'Dutch Sandwich' saves Google and many other U.S. companies billions in taxes". MSNBC. 22 October 2010.
- Chitum, Ryan (2007). "How 60 billion are lost in tax loopholes", Bloomberg.
- "Google 2.4% Rate Shows How $60 Billion Lost to Tax Loopholes - Bloomberg". www.bloomberg.com.
- "How Google saved $2 billion in income tax - Times of India". www.timesofindia.com.
- "NS drukt belasting via Ierland". Nederlandse Omroep Stichting. 1 September 2012. Retrieved 2013-01-17.