The Netherlands' Economy
Letterbox Companies and Tax Planning
How the Netherlands became a hub for multinational tax planning through holding companies and royalty routing, and reforms to curb it.
The Netherlands has been a conduit for multinational tax planning.
How it worked
- Holding companies with few staff, called letterbox companies.
- Routing royalties and dividends through the Netherlands to low-tax places.
- The “Double Irish with a Dutch Sandwich” used Ireland and the Netherlands.
Tax treaties
Many treaties reduced withholding taxes.
Reforms
- From 2021, a withholding tax on payments to low-tax countries.
- The OECD global minimum tax of 15%.
India link
Many foreign investments into India came via the Netherlands, partly for treaty benefits.
The royalty route
A tech firm once routed royalties through a Dutch company to a tax haven, paying little tax.
Thinking only small islands are tax hubs
The Netherlands played a big role.
Key takeaways
- Letterbox companies routed profits.
- The Dutch Sandwich cut taxes.
- New withholding taxes began in 2021.
- The global minimum tax limits this.
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