Conduit jurisdiction
A conduit jurisdiction is a country used as a transit point for profit on its way to a tax haven, chosen because its tax treaties and low withholding-tax rates let money pass through cheaply. A haven is where profit comes to rest; a conduit is the corridor it travels along. The classic conduits, the Netherlands, Luxembourg and Ireland, run extensive treaty networks and collect only a small toll as profit flows toward a zero-tax destination. Academic mapping (García-Bernardo and colleagues, Scientific Reports 2017) found that five conduit countries, the Netherlands, the UK, Switzerland, Singapore and Ireland, route close to half of all corporate conduit flows. The line between "haven" and "conduit" often blurs, but the function differs.
ByLoopholeKiln EditorialPublished
Figures current as of·Corrections
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Example: advertising income earned from UK users is paid first to a Dutch entity under a favourable treaty, which then passes it to a zero-tax holding company, so very little tax is paid anywhere along the route.
Why it matters to a small business: you have no treaty structuring and no chain of holding companies to route income through. Your money goes from your customer to your bank account and is taxed once, in full.