Ireland Closing “Double Irish” Tax Loophole That Helps Tech Companies Save Billions

Ireland will be closing a tax loophole next year that helped save tech companies such as Google, Facebook, Apple, Microsoft, and Twitter billions of dollars. But while the loophole will end next year, companies already using it will be able to continue the practice until 2020.

"Aggressive tax planning by the multinational companies has been criticized by governments across the globe and has damaged the reputation of many countries," said Ireland’s finance minister Michael Noonan to the Irish Parliament. "I am abolishing the ability of companies to use the ‘double Irish’ by changing our residency rules to require all companies registered in Ireland to also be tax resident." The “double irish” loophole allows a company, with a headquarters located in Ireland, to make royalty payments for IPs to a separate Irish-registered subsidiary. That subsidiary can then have its tax home located in a country with no corporate income tax even though it is incorporated in Ireland.

Image Source: WikiMedia (AnCatDubh)

One such company, that takes advantage of the loophole and saves billions, happens to be Google. The company has its headquarters located in Dublin and employs 2,500 people. Revenue, which mostly comes from online advertising, is generated by a Dublin-based subsidiary that then pays it in royalties to a separate subsidiary that is headquartered in Bermuda for tax purposes.

While this is bad for new companies that were looking to take advantage of the loophole, Google, and other tech companies, will have until 2020 to decide if they wish to re-locate their offices to another country or stay in Ireland.