Have you ever heard of a “Double Irish?” To some readers, this term may sound more like a stiff drink. Perhaps the tax lawyers and accountants that serve multinational corporations are becoming more like bartenders by preparing the kind of “drinks” their customers really desire.
The Double Irish is a tax avoidance arrangement involving two Irish registered companies. The structure is quite effective for companies with valuable intellectual property rights and it has been commonly used by large technology and pharmaceutical companies. The structure involves the payment of royalties and fees between controlled entities for the use of intellectual property rights. One of the Irish companies is offshore and located in a tax haven such as Bermuda or the Cayman Islands and holds non-U.S. intellectual property rights. The other company is based in Ireland. The entity based in Ireland pays royalties and fees to the entity in the tax haven thereby reducing taxable income. The left over profits for the entity based in Ireland are taxed at the rate of 12.5%. Now compare the foregoing structure to a plain vanilla C corporation based in the United States, with taxable income above $18,333,333, thereby paying income tax at the rate of 35%, plus any applicable state and local taxes. Read more »