The contracts with Italian customers, formally defined in Ireland, were instead prepared and handled by the employees of the Milanese company, according to what the investigators had ascertained. The documents were then sent to the Irish company Google Ireland Ltd, where they were signed and sent back to Italy. The Dublin company, therefore, had operated for years in Italy with an “undeclared” and not formally constituted permanent establishment.
The triangulation between Ireland and Holland
It is at this point that the “Double Irish with a Dutch Sandwich” system came into play, a mechanism – used by Google not only for Italy – which involved two Irish companies (Google Ireland and Google Ireland Holdings) and one Dutch entity (Google Netherlands Holdings Bv).
Google Ireland, which was based in a building in the center of Dublin, was no ordinary company: it sold advertising on the search engine for all countries outside the United States and accounted for more than 80% of the American multinational’s foreign turnover. Revenues from advertising contracts signed in Italy and other European, Asian, African and Pacific countries ended up in Dublin. And this was the first step in the system that allowed Google to pay a negligible percentage of taxes.
There was another detail that needed to be kept in mind to understand how the “Double Irish with a Dutch Sandwich” worked. Google Ireland Ltd, which received money from Italy and other countries, in turn had to pay royalties to the second Irish company, Google Ireland Holdings, because it was the latter that owned the intellectual property of the search engine’s algorithm. research.
Thus, the first Irish subsidiary paid royalties to the second, generating expenses that reduced its tax base and allowed it to pay less tax in Ireland. The second company diverted profits to Bermuda where it paid no taxes. That’s why Google had amassed around $50 billion tax-free in the UK Overseas Territory.
