Dutch Sandwich

“Dutch sandwich” is a financial term about reducing U.S. tax obligations. For example, a Dutch corporation is formed and an investment is made in a Netherlands bank; an Antilles trust company (where secrecy laws don’t reveal the owner) helps to “lend” a U.S. investor his own money from the Dutch bank. The sham is a “Dutch sandwich” between the Netherlands and the Dutch Antilles (two Dutch jurisdictions).
       
The financial “Dutch sandwich” is sometimes called “open face Dutch sandwich,” a nod to the boterham, a sandwich of dry cheese, baloney, and ham between buttered bread.
 
The term “Dutch sandwich” has been cited in print since at least 1979. Joe Bernstein of the New York Land Co. has been given credit for coining the term (see 1988 citation below). Bernstein sent an email to this website:
 
“I wrote up the ‘Dutch Sandwich’ structure in a 1979 Tax Law Review article, when I was 30 (not 24): ‘Inward Investments in Securities and Direct Operations through the British Virgin Islands: How Serious a Rival to the Netherlands Antilles Island Paradise?’
Tax Law Review, Spring, 1979
http://www.counsel-ny.com/attorneys.html”
 
The “Dutch sandwich” term was popularized in October 2010, when it was revealed that Google used the method to lower its U.S. tax liability. Another tax scheme (involving a different European country) is the “Double Irish.”
   
 
UNODC Money-Laundering Terms Dictionary
Dutch Sandwich
A tax structure using companies from two Dutch Jurisdictions to reduce the U.S. tax obligation on royalty and patent income flowing from the United States.
     
Offshore Lexicon
Dutch sandwich 
A technique of writing-off the interest your domestic (U.S.) company pays on loans that you received when you borrowed from your own offshore bank. 
 
HeinOnline
International Tax Journal, Volume 7, 1980-1981, pg. 449:
Using Commodity Straddles to Circumvent FIRPTA
By Daniel J, Parks and James William Clement
In the relatively short time since FIRPTA was enacted, numerous articles have described the complexities of the new statute and speculated as to investment techniques that would avoid taxation under FIRPTA. A principal exception in the new legislation provides that U.S. tax treaties will override FIRPTA until December 31, 1984. A commonly mentioned technique utilizing this FIRPTA exception is the “Dutch Sandwich,” which employs a provision of the tax treaty between the United States and the Netherlands. This article examines the “Dutch Sandwich” and a commodity straddle alternative.
   
Google Books
Realty Joint Ventures, 1982:
Capital sources, negotiation, and documentation
Edited by Lewis R. Kaster; Noel W. Nellis; Practising Law Institute.
New York, N.Y. (810 7th Ave., New York 10019) : Practising Law Institute
1982
Pg. 771: 
...Canada Tax Convention (see article by Boidman under Taxation in Addendum B) and (b) the current US— Netherlands Tax Convention (now under renegotiation), which (in the so-called “open face Dutch sandwich”) permits a Dutch company (“BV”) owning a US real property holding…
 
Google Books
Imelda, steel butterfly of the Philippines
By Katherine W. Ellison
New York, NY: McGraw-Hill
1988
Pg. 191:
Young (in 1981, Joe was 32 and Ralph 23) and aggressive, the Bernsteins were tax haven experts who had begun to build careers helping the world’s ultrarich get richer. Joe Bernstein, owlish behind thick octagonal spectacles, took pride in having coined the phrase “Dutch Sandwich” to describe one type of corporate shell.
 
Time magazine
A Torrent of Dirty Dollars
By JONATHAN BEATY AND RICHARD HORNIK
Monday, Dec. 18, 1989
In Willemstad, the sunny Caribbean capital of the Netherlands Antilles, a banker ushers an American visitor through a hotel casino and into a dining room overlooking the harbor. During refreshments, the prospective customer says he expects a six-figure cash windfall soon and would like to bring the money “quietly” into the U.S. At first the banker responds cautiously. “This money isn’t, ah, tainted, is it?” When the American assures him it is not, the officer of the Curacao branch of the French-owned Credit Lyonnais Nederland smiles and orders another tonic water. In that case, says the banker, he can arrange a so-called Dutch sandwich.
 
Under this multilayered plan, the Paris bank would set up a corporation for the customer in Rotterdam, where he would deposit his cash in the bank’s local branch. The American would control the newly created Dutch corporation through an Antilles trust company, but his identity as the owner would be protected by the island group’s impenetrable secrecy laws. The Caribbean branch would then “lend” the American his own money held in Rotterdam.
(...)
Much is at stake as the powerful flow of narcodollars is recycled through the world’s financial system. Drug lords and other lawbreakers are believed to be buying valuable chunks of the American economy, but clever Dutch sandwiches and other subterfuges make it almost impossible for U.S. authorities to track foreign investors.
           
Google Books
False Profits:
The inside story of BCCI, the world’s most corrupt financial empire
By Peter Truell and Larry Gurwin
Boston, MA: Houghton Mifflin
1992
Pg. 51:
CCAI, in turn, would own all the stock of a US dummy company, which, in turn, would own FGB. The layering of companies in these jurisdictions is a common technique used to avoid taxes, known as a “Dutch sandwich.
   
Google Books
Black Money
By Michael M. Thomas
New York, NY: Crown
1994
Pg. 102:
The proceeds of that ‘loan’ are then wired free and clear of US taxes to your account at Chase Manhattan in Manhattan. Ergo: Dutch sandwich.”
     
Expatica The Netherlands
25/07/2003
Boter eat that boterham
Don’t like boterham? Kevin Lowe explains why cheese or ham on bread is the key to fitting in with your Dutch co-workers.
I admit it. I hate the stuff — all of it. And I’m not alone. Thin slices of slimy baloney. Ham. Dry cheese. Leverkaas.
 
You know what I’m talking about.
 
France is famous for the two-hour, wine and dine lunch: steak frites, escallope milanaise, or perhaps the special of the day. The UK is quicker, but variety rules the roost with choices among a thousand ethnic delights.
 
Then there’s the boterham. Butter. And ham. On bread. Maybe cheese and butter, on bread. Never both.
 
To understand the boterham, and the Dutch approach to lunch in general, requires an acceptance of the Dutch way of doing a lot of things. Get it wrong, and you won’t just look odd, you could seriously damage your career.
 
Google Books
Supermob:
How Sidney Korshak and His Criminal Associates Became America’s Hidden Power Brokers
By Gus Russo
New York, NY: Bloomsbury USA
2006
Pg. 402:
Nicknamed a Dutch Sandwich since the client’s money was hidden between a sham corporation based in Amsterdam and a sham trust in Curacao (Dutch [Pg. 403—ed.] Antilles), the scheme allowed the customers’ income to be brought into the United States disguised as untaxable “loans” from the Caribbean bank.
 
NYTimes.com - Diner’s Journal
pietro
wayton ct
July 23rd, 2010 12:19 pm
No such thing as smorrebrod in Groot Mokum that is Amsterdam for anyone who was not born there. An open faced sandwich is known as a ’ boterham “. Which is just a slice of bread with a topping and can be savory or sweet.
   
New York magazine - Daily Intel
Google Uses the ‘Double Irish’ and the ‘Dutch Sandwich’ to Avoid Billions in Taxes
10/21/10 at 11:37 AM
(...)
Over the past three years, reports Bloomberg, Google has managed to sidestep paying $3.1 billion, getting its tax rate to a shocking 2.4 percent, the lowest of the top five American tech companies. Corporate income-tax rate in the U.S. is 35 percent. Like Facebook and Microsoft, Google uses the tax law that lets companies move profits into and out of subsidiaries in Ireland, leveraging strategies known to lawyers as the “Double Irish” (because it relies on two Irish companies) and the “Dutch Sandwich” (because profits make a stopover in the Netherlands between Ireland and Bermuda or the Cayman Islands). Hey, it’s tax law — they have to sex it up somehow.