Scarinci Hollenbeck, LLC
The Firm
201-896-4100 info@sh-law.comFirm Insights
Will New Tax Strategy Become More Widely Adopted
Author: Scarinci Hollenbeck, LLC
Date: October 23, 2013
Key Contacts
Back
Many corporations are implementing strategies to reduce their liabilities under U.S. tax law, but as these practices come under more scrutiny from the Internal Revenue Service, some analysts are questioning whether they will remain viable in the future.
For instance, the Financial Times recently highlighted a practice implemented by Google, which allowed it to funnel roughly $11.91 billion in royalty payments to a shell corporation in Bermuda in 2012, a 25 percent increase from the amount transferred in 2011. The strategy – commonly called the Dutch Sandwich – involves a company selling or licensing its foreign rights to intellectual property developed in the United States to a subsidiary in a country with lower tax rates, Bloomberg explained. In doing so, foreign profits are then attributed to that offshore subsidiary rather than the U.S., greatly reducing the company’s tax liabilities.
In the case of Google, the company lowers its overseas tax rate to roughly 5 percent, less than half the rate in already low-tax Ireland. However, the move has also sparked controversy over the practice, namely because Google earns most of its foreign income in Ireland and does not pay substantial taxes in other countries. In addition to this set-up, the company moves most of its profits from Ireland to Bermuda, choosing to route the funds through the Netherlands to avoid withholding taxes, the Times added.
It is unclear how many U.S. companies have adopted this strategy, but a number of large corporations, including Facebook, Microsoft, and Starbucks have all come under fire for their controversial tax strategies. However, many analysts argue that while they may be complex, they are currently legal under U.S. tax law. This assertion may come under dispute by the IRS, however, which has said it will take a more detailed look into corporate tax strategies.
- Practices: Tax and Trusts & Estates
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
Why Secured Transactions Are Important
Secured transactions form the backbone of a wide range of business dealings, including business loans, mortgages, and inventory financing. Because the stakes are often high and relatively minor oversights can have drastic consequences, lenders and borrowers should thoroughly understand how to form an enforceable security agreement that protects their legal rights. What Is a Secured […]
Author: Dan Brecher
Don’t Cash a “Paid in Full” Check Without Understanding the Legal Implications
Cashing a check marked “paid in full” can be a risky endeavor, particularly if you don’t fully understanding the legal implications. If you are owed more than the amount of the check you accept and deposit, you may waive your right to collect the full disputed amount. That is why you should consider either rejecting […]
Author: Dan Brecher
Changes to Qualified Small Business Stock Will Benefit Startup Founders and Investors
The One Big Beautiful Bill Act of 2025 (OBBBA) significantly impacts federal taxes, credits, and deductions. A key change relating to Qualified Small Business Stock (QSBS) allows greater tax-free gains for investments in startups and other qualifying small businesses. Company founders and other investors should understand how the enhanced tax strategy works or risk missing […]
Author: Dan Brecher
Corporate Consolidation and Antitrust Issues in Mergers
Corporate consolidation involves two or more businesses merging to become a single larger entity. The result is often a stronger and more competitive company that can better navigate today’s competitive marketplace. What Is Corporate Consolidation? Corporate consolidation closely resembles a basic merger transaction. The primary difference is that a consolidation creates an entirely new business […]
Author: Dan Brecher
What is Business Law and Why Is it Important?
Business law plays a critical role in nearly every aspect of running a successful enterprise, from negotiating a commercial lease to drafting employee policies to fulfilling corporate disclosure obligations. Understanding what is business law and your legal obligations can help your business run smoothly and build productive relationships with clients, business partners, regulators, and others. […]
Author: Dan Brecher
Corporate Transactions: Best Practices for Successful Deals
Corporate transactions can have significant implications for a corporation and its stakeholders. For deals to be successful, companies must act strategically to maximize value and minimize risk. It is also important to fully understand the legal and financial ramifications of corporate transactions, both in the near and long term. Understanding Corporate Transactions The term “corporate […]
Author: Dan Brecher
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.