The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.
Sameer Jain, MBA 2015-17, Vinod Gupta School of Management, IIT Kharagpur.
Google moved 10.7 billion euros through Netherlands to Bermuda in 2014, using a strategy known to accountants as Double Irish, Dutch Sandwich, which allowed it to earn most of its foreign income almost tax-free.
The Double Irish with a Dutch Sandwich is a tax avoidance technique which involves the use of combination of Irish and Dutch subsidiary companies to shift profits to low or no tax jurisdictions. The double Irish with a Dutch sandwich technique involves sending profits first through one Irish company, then to a Dutch company and finally to a second Irish company headquartered in a tax haven (source : Investopedia).
This strategy has allowed companies to reduce their corporate tax liabilities drastically.
Google which is now a part of holding company has employed this technique to pay just around 6% on its foreign income as compared to 35% in US. As per the accounts of Google Netherlands Holdings, it transferred almost all of its revenue from an Irish affiliate to a Bermuda based, Irish-registered affiliate called Google Ireland Holdings. This allowed Google to avoid US corporate tax as well as European withholding taxes on funds. While Bermuda charges companies no income tax, Google Netherlands Holding which has no employees had paid just 2.8 million euros as tax on its income.
This technique is mostly used by the multinational tech companies as these firms can easily transfer their profits to other countries by assigning intellectual property rights to the foreign subsidiaries.