This paper uses the financial statements of special purpose entities (SPEs) for explaining the origin and destination of dividend, interest, and royalty flows passing the Netherlands. We find that Bermuda is the most important destination for royalty flows. These flows come from Ireland, Singapore and the United States. For dividend and interest payments the geographical pattern is more widespread. We find a substantial tax reduction for royalties by using Dutch SPEs compared to a direct flow between the origin and destination country. However, we cannot find such tax savings for dividends and interest with an approximation based on statutory tax rates. When controlling for country characteristics in our regression analysis we do find that tax differentials partially explain the geographical patterns of income flows diverted through the Netherlands. This is the case for the likelihood that a route is used, as well as for the size of the flows. This paper is one of the first using bilateral income flows as dependent variables instead of bilateral FDI stocks or flows.
|Place of Publication||Tilburg|
|Publisher||CentER, Center for Economic Research|
|Number of pages||39|
|Publication status||Published - 8 Jul 2019|
|Name||CentER Discussion Paper|
- corporate taxation
- international tax planning
- treaty shopping
- bilateral dividend flows
- bilateral interest flows
- bilateral royalty flows
Lejour, A., Mohlmann, J., van't Riet, M., & Benschop, T. (2019). Dutch Shell Companies and International Tax Planning. (CentER Discussion Paper; Vol. 2019-024). Tilburg: CentER, Center for Economic Research.