Google cut its 2015 tax bill by $3.6 billion using the infamous Dutch Sandwich loophole

Google was able to shave $3.6 billion from its 2015 tax bill by relying on an elaborate system of loopholes known as the “Double Irish" and Dutch Sandwich,” according to a report from Bloomberg today. The loopholes — infamous among US corporations — effectively allow companies as large and profitable as Google to shuffle profits through subsidiaries in low-tax countries like the Netherlands and Ireland, and then onward to tax havens like Bermuda and the Cayman Islands. In this case, Google moved $15.5 billion worth of euros to a Bermuda shell company, cutting its tax rate outside the US to 6.9 percent last year, according to regulatory filings in the Netherlands that were obtained by Bloomberg.

The structure of the Double Irish and Dutch Sandwich is complex. It begins with international profits — in this case Google’s tax revenues outside the US — being siphoned through an Irish subsidiary, where corporate tax rates are historically low. This subsidiary, known as Google Ireland Limited, then sends the money to a Dutch subsidiary in the Netherlands, which also enjoys low corporate tax rates. From there, Google moves the money to a Bermuda-based company called Google Ireland Holdings Unlimited, which was granted the right to license Google intellectual property so that it can claim ownership of the profits. It has no employees. The two Irish subsidiaries and the Dutch intermediary is where the tax loophole derives its nickname.