Editing Corporate haven (section)

==Debt–based BEPS tools{{anchor|Debt-based BEPS tools}}==
{{see also|Irish Section 110 Special Purpose Vehicle (SPV)}}

===Dutch "Double Dip"===
[[Image:JoopWijn.jpg|thumb|right|'''Ex. Dutch Minister [[Joop Wijn]]''' credited with introducing the [[Dutch Sandwich]] IP-based BEPS tool (which is often used with the [[Double Irish]] BEPS tool), and the "Dutch Double Dip" Debt-based BEPS tool]]
While the focus of corporate tax havens continues to be on developing new IP-based BEPS tools (such as OECD-compliant knowledge/patent boxes), Ireland has developed new BEPS tools leveraging traditional [[securitisation]] SPVs, called [[Irish Section 110 Special Purpose Vehicle (SPV)|Section 110 SPVs]].  Use of intercompany loans and loan interest was one of the original BEPS tools and was used in many of the early U.S. corporate [[tax inversion]]s (was known as [[Corporate inversion#Mechanics|"earnings-stripping"]]).<ref>{{cite news|url=https://www.bloomberg.com/quicktake/tax-inversion|title=Bloomberg Special TAX INVERSION|newspaper=Bloomberg.com|publisher=Bloomberg|date=2 May 2017|access-date=13 May 2018|archive-url=https://web.archive.org/web/20180413010306/https://www.bloomberg.com/quicktake/tax-inversion|archive-date=13 April 2018|url-status=live|df=dmy-all}}</ref>

The Netherlands has been a leader in this area, using specifically worded legislation to enable IP-light companies further amplify "earnings-stripping".  This is used by mining and resource extraction companies, who have little or no IP, but who use high levels of leverage and asset financing.<ref name="neth">{{cite web|url=https://www.oxfam.org/sites/www.oxfam.org/files/file_attachments/netherlands-taxhaven.pdf|title=The Netherlands: a tax haven continuing its contribution to the corporate tax race to the bottom (translated)|publisher=Oxfam Novib|date=May 2016|access-date=2018-05-23|archive-url=https://web.archive.org/web/20180623212542/https://www.oxfam.org/sites/www.oxfam.org/files/file_attachments/netherlands-taxhaven.pdf|archive-date=2018-06-23|url-status=dead}}</ref><ref name="dut2"/>  Dutch tax law enables IP-light companies to "overcharge" their subsidiaries for asset financing (i.e. reroute all untaxed profits back to the Netherlands), which is treated as tax-free in the Netherlands.  The technique of getting full tax-relief for an artificially high-interest rate in a foreign subsidiary, while getting additional tax relief on this income back home in the Netherlands, became known by the term, "double dipping".<ref name="dut10"/><ref>{{cite web|url=https://home.kpmg.com/content/dam/kpmg/pdf/2014/05/netherlands-2014.pdf|title=The Netherlands: Taxation of Cross-Border Mergers|publisher=KPMG|date=April 2014|access-date=2018-05-25|archive-url=https://web.archive.org/web/20151210083939/https://home.kpmg.com/content/dam/kpmg/pdf/2014/05/netherlands-2014.pdf|archive-date=2015-12-10|url-status=live}}</ref>   As with the [[Dutch sandwich]], ex. Dutch Minister [[Joop Wijn]] is credited as its creator.

{{quote|In 2006 he [ [[Joop Wijn]] ] abolished another provision meant to prevent abuse, this one pertaining to hybrid loans. Some revenue services classify those as loans, while others classify those as capital, so some qualify payments as interest, others as profits. This means that if a Dutch company provides such a hybrid [and very high interest] loan to a foreign company, the foreign company could use the payments as a tax deduction, while the Dutch company can classify it as profit from capital, which is exempt from taxes in the Netherlands [called "double dipping"]. This way no taxes are paid in either country.|source=[[Oxfam]]/''[[De Correspondent]]'', "How the Netherlands became a Tax Haven", 31 May 2017.<ref name="oxf"/><ref name="dec"/>}}

===Irish Section 110 SPV===
[[File:Stephen Donnelly 2016.jpg|thumb|'''[[Stephen Donnelly|Stephen Donnelly TD]]''' Estimated US distressed funds used Section 110 SPVs to avoid €20 billion in Irish taxes on almost €80 billion of Irish domestic investments from 2012 to 2016.<ref name="sd">{{cite web |url=http://stephendonnelly.ie/wp-content/uploads/2016/10/Closing-Down-Section-110-for-Vulture-Funds.pdf |title=Why Letting Section 110 SPVs Operate in the Irish Domestic Economy Will Damage Our Tax Base and Our Reputation As a 'Low-Tax' Economy |publisher=Stephen Donnelly (Dail Submission) |date=September 2016 |access-date=2018-05-19 |archive-url=https://web.archive.org/web/20171114101233/http://stephendonnelly.ie/wp-content/uploads/2016/10/Closing-Down-Section-110-for-Vulture-Funds.pdf |archive-date=2017-11-14 |url-status=dead }}</ref>]]

The [[Irish Section 110 Special Purpose Vehicle (SPV)|Irish Section 110 SPV]] uses complex securitisation loan structuring (including [[Orphan structure|"orphaning"]] which adds confidentiality), to enable the profit shifting.  This tool is so powerful, it inadvertently enabled US [[distressed debt]] funds avoid billions in Irish taxes on circa €80 billion of Irish investments they made in 2012-2016 (see [[Irish Section 110 Special Purpose Vehicle (SPV)#Abuses|Section 110 abuse]]).<ref name="l1">{{cite news|url=https://www.bbc.com/news/world-europe-37287182|title=Forget Apple: Ireland's other taxing issue|work=BBC News|date=6 September 2016|access-date=21 July 2018|archive-url=https://web.archive.org/web/20180627125139/https://www.bbc.com/news/world-europe-37287182|archive-date=27 June 2018|url-status=live|df=dmy-all}}</ref><ref name="l2">{{cite news|url=https://www.ft.com/content/619c9bde-74f3-11e6-bf48-b372cdb1043a|title=Ireland confronts another tax scandal closer to home|newspaper=Financial Times|date=11 September 2016|access-date=13 May 2018|archive-url=https://web.archive.org/web/20180612143047/https://www.ft.com/content/619c9bde-74f3-11e6-bf48-b372cdb1043a|archive-date=12 June 2018|url-status=live|df=dmy-all}}</ref><ref name="nnn">{{cite news|url=https://www.independent.ie/opinion/comment/how-did-the-government-shaft-mortgage-holders-and-taxpayers-in-one-fell-swoop-34870748.html|title=How did the Government shaft mortgage holders and taxpayers in one fell swoop?|newspaper=Irish Independent|date=10 July 2016|access-date=13 May 2018|archive-url=https://web.archive.org/web/20180428093455/https://www.independent.ie/opinion/comment/how-did-the-government-shaft-mortgage-holders-and-taxpayers-in-one-fell-swoop-34870748.html|archive-date=28 April 2018|url-status=live|df=dmy-all}}</ref><ref name="nna">{{cite news|url=https://www.independent.ie/opinion/columnists/colette-browne/vulture-funds-are-feasting-taxfree-on-carcass-of-our-property-crash-35005936.html|title=Vulture funds are feasting tax-free on carcass of our property crash|newspaper=Irish Independent|date=30 August 2016|access-date=13 May 2018|archive-url=https://web.archive.org/web/20180428093528/https://www.independent.ie/opinion/columnists/colette-browne/vulture-funds-are-feasting-taxfree-on-carcass-of-our-property-crash-35005936.html|archive-date=28 April 2018|url-status=live|df=dmy-all}}</ref>  This was despite the fact that the seller of the circa €80 billion was mostly the Irish State's own [[National Asset Management Agency]].

The global securitisation market is circa $10 trillion in size,<ref name="jpm">{{cite web|url=https://www.morganstanley.com/im/publication/insights/investment-insights/ii_overviewofglobalsecuritizedassets_en.pdf|title=Global Securitisation Market|publisher=Morgan Stanley|date=2017|access-date=2018-05-13|archive-url=https://web.archive.org/web/20180317162303/https://www.morganstanley.com/im/publication/insights/investment-insights/ii_overviewofglobalsecuritizedassets_en.pdf|archive-date=2018-03-17|url-status=dead}}</ref> and involves an array of complex financial loan instruments, structured on assets all over the world, using established securitization vehicles that are accepted globally (and whitelisted by the OECD).  This is also helpful for concealing corporate BEPS activities, as demonstrated by sanctioned Russian banks using Irish Section 110 SPVs.<ref name="rus2"/><ref name="rus3"/>

This area is therefore an important new BEPS tool for EU corporate tax havens, Ireland and Luxembourg,<ref>{{cite news|url=https://www.independent.ie/business/irish/ireland-is-top-eurozone-jurisdiction-for-secretive-spvs-36047198.html|title=Ireland is top Eurozone jurisdiction for SPVs|newspaper=Irish Independent|date=19 August 2017|access-date=13 May 2018|archive-url=https://web.archive.org/web/20180628235612/https://www.independent.ie/business/irish/ireland-is-top-eurozone-jurisdiction-for-secretive-spvs-36047198.html|archive-date=28 June 2018|url-status=live|df=dmy-all}}</ref> who are also the EU's leading securitisation hubs.  Particularly so, given the new anti-IP-based BEPS tool taxes of the U.S. [[Tax Cuts and Jobs Act of 2017]] (TCJA), (i.e. the new GILTI tax regime and BEAT tax regime), and proposed EU Digital Services Tax (DST) regimes.<ref name="carrot">{{cite web|url=https://taxfoundation.org/inversions-new-tax-law/|title=Inversions under the New Tax Law: Carrot and Stick|publisher=Tax Foundation|date=13 March 2018|access-date=13 May 2018|archive-url=https://web.archive.org/web/20190415120425/https://taxfoundation.org/inversions-new-tax-law/|archive-date=15 April 2019|url-status=dead|df=dmy-all}}</ref><ref name="Irish Times">{{cite news|url=https://www.irishtimes.com/business/donald-trump-singles-out-ireland-in-tax-speech-1.3310149?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Fdonald-trump-singles-out-ireland-in-tax-speech-1.3310149|title=Donald Trump singles out Ireland in tax speech|newspaper=The Irish Times|date=29 November 2017|access-date=13 May 2018|archive-url=https://web.archive.org/web/20180403112427/https://www.irishtimes.com/business/donald-trump-singles-out-ireland-in-tax-speech-1.3310149?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Fdonald-trump-singles-out-ireland-in-tax-speech-1.3310149|archive-date=3 April 2018|url-status=live|df=dmy-all}}</ref><ref name="gnx2">{{cite news|url=https://www.irishtimes.com/business/economy/europe-points-finger-at-ireland-over-tax-avoidance-1.3417948|title=Europe points finger at Ireland over tax avoidance|newspaper=The Irish Times|date=7 March 2018|access-date=13 May 2018|archive-url=https://web.archive.org/web/20180307095256/https://www.irishtimes.com/business/economy/europe-points-finger-at-ireland-over-tax-avoidance-1.3417948|archive-date=7 March 2018|url-status=live|df=dmy-all}}</ref>

The U.S. TCJA anticipates a return to debt-based BEPS tools, as it limits interest deductibility to 30% of EBITDA (moving to 30% of EBIT post 2021).<ref name="lexology">{{cite web|url=https://www.lexology.com/library/detail.aspx?g=04adc5c2-639a-45ce-8680-e080b5dacdbf|title=Tax Reform - Considerations for U.S. Multinationals|publisher=Lexology|date=9 March 2018|access-date=13 May 2018|archive-url=https://web.archive.org/web/20180424202538/https://www.lexology.com/library/detail.aspx?g=04adc5c2-639a-45ce-8680-e080b5dacdbf|archive-date=24 April 2018|url-status=live|df=dmy-all}}</ref><ref>{{cite web|url=https://www.jpmorgan.com/jpmpdf/1320744529831.pdf|title=U.S. TCJA JPMorgan|publisher=JPMorgan|date=January 2018|access-date=2018-05-13|archive-url=https://web.archive.org/web/20180514064646/https://www.jpmorgan.com/jpmpdf/1320744529831.pdf|archive-date=2018-05-14|url-status=live}}</ref>

While [[securitisation]] SPVs are important new BEPS tools, and acceptable under global tax-treaties, they suffer from "substance" tests (i.e. challenges by tax authorities that the loans are artificial).  Irish Section 110 SPV's use of "[[Irish Section 110 Special Purpose Vehicle (SPV)#Features|Profit Participation Notes]]" (i.e. artificial internal intergroup loans), is an impediment to corporates using these structures versus established IP-based BEPS tools.<ref>{{cite web|url=http://www.arthurcox.com/wp-content/uploads/2012/06/Arthur-Cox-Establishing-SPVs-in-Ireland-for-Structured-Finance-Transactions-May-2014.pdf|title=Ireland as a Domicile for Structured Finance|publisher=Arthur Cox Law|date=2014|access-date=2018-05-13|archive-url=https://web.archive.org/web/20180316023100/http://www.arthurcox.com/wp-content/uploads/2012/06/Arthur-Cox-Establishing-SPVs-in-Ireland-for-Structured-Finance-Transactions-May-2014.pdf|archive-date=2018-03-16|url-status=dead}}</ref><ref>{{cite web|url=http://www.internationaltaxreview.com/Article/3439735/Irish-tax-regime-for-securitisation-vehicles.html|title=Irish Securitisation Section 110 Vehicles|publisher=International Tax Review|date=15 March 2015|access-date=13 May 2018|archive-url=https://web.archive.org/web/20180612140504/http://www.internationaltaxreview.com/Article/3439735/Irish-tax-regime-for-securitisation-vehicles.html|archive-date=12 June 2018|url-status=live|df=dmy-all}}</ref>  Solutions such as the [[Irish Section 110 Special Purpose Vehicle (SPV)#Evolution|Orphaned Super-QIAIF]] have been created in the Irish tax code to resolve this.

However, while Debt-based BEPS tools may not feature with U.S. multinational technology companies, they have become attractive to global financial institutions (who do not need to meet the same "substance" tests on their financial transactions).<ref>{{cite news|url=https://www.independent.ie/business/irish/strong-evidence-ireland-aiding-eu-banks-taxavoidance-schemes-35569517.html|title='Strong evidence' Ireland aiding EU banks' tax-avoidance schemes|newspaper=Irish Independent|date=25 March 2017|access-date=19 May 2018|archive-url=https://web.archive.org/web/20180519205108/https://www.independent.ie/business/irish/strong-evidence-ireland-aiding-eu-banks-taxavoidance-schemes-35569517.html|archive-date=19 May 2018|url-status=live|df=dmy-all}}</ref><ref>{{cite news|url=https://www.irishtimes.com/business/financial-services/ireland-accused-of-facilitating-tax-avoidance-by-european-banks-1.3026167|title=Ireland accused of facilitating tax avoidance by European banks|newspaper=The Irish Times|date=17 March 2017|access-date=19 May 2018|archive-url=https://web.archive.org/web/20180705152320/https://www.irishtimes.com/business/financial-services/ireland-accused-of-facilitating-tax-avoidance-by-european-banks-1.3026167|archive-date=5 July 2018|url-status=live|df=dmy-all}}</ref>

In February 2018, the [[Central Bank of Ireland]] upgraded the little-used Irish [[Qualifying investor alternative investment fund (QIAIF)#L-QIAIF rationale|L-QIAIF]] regime to offer the same tax benefits as Section 110 SPVs but without the need for Profit Participation Notes and without the need to file public accounts with the Irish [[Companies Registration Office (Ireland)|CRO]] (which had exposed the scale of Irish domestic taxes Section 110 SPVs had been used to avoid, see [[Irish Section 110 Special Purpose Vehicle (SPV)#Abuses|abuses]]).