The European conduits: Ireland, the Netherlands, Luxembourg and Switzerland

These are not palm-tree havens. They are four prosperous, rule-of-law European economies, and that respectability is precisely what makes them useful. Ireland, the Netherlands, Luxembourg and Switzerland each play a distinct role in moving and parking corporate profit: a low-rate base, a pass-through, a holding domicile, a discreet headquarters. This page sets out what each offers. The mechanics of how money actually passes through a conduit are on the conduit jurisdictions page; here we describe the four addresses themselves.

The Tax Justice Network uses a specific term for the worst of the European group. Its "axis of tax avoidance" is the handful of jurisdictions responsible, between them, for the largest share of global corporate tax abuse. It is worth being exact about the membership, because it is often got wrong: the axis is the United Kingdom, the Netherlands, Luxembourg and Switzerland. Ireland is not one of the four. On the network's State of Tax Justice figures, that axis was responsible for about 55% of all the tax the world loses to cross-border abuse, counting both corporate profit-shifting and private tax evasion; the corporate-only share attributable to the four is about 47%. The UK's place in it is covered on the spider's web page. The other three, plus Ireland, are below.

Ireland: the low-rate base

Ireland's appeal is built on a headline number that has barely moved in a generation: a 12.5% corporation tax rate on trading income, unchanged since 2003. Around that sit an extensive network of more than seventy tax treaties, an exemption from tax on gains from selling qualifying subsidiaries, and a generous regime of capital allowances for intangible assets that lets a company write down the cost of acquired intellectual property against its taxable income, up to 80% of the income of the relevant trade in a year.

Two points keep Ireland current rather than historical. First, its Knowledge Development Box, the reduced rate for income from qualifying patents and software, rose to 10% with effect from 1 October 2023; it is no longer the 6.25% rate often quoted. Second, from 1 January 2024 Ireland implemented the OECD's global minimum tax, so that groups above 750 million euros of revenue now pay an effective rate of at least 15% in Ireland; the 12.5% rate remains for everyone below that threshold.

The definitive public-record example of how Ireland's old ruling system worked is the EU state-aid case against a US technology group. The European Commission ruled in 2016 that Ireland had granted that company up to 13 billion euros in unlawful state aid, through rulings that let two of its Irish companies attribute almost all their profit to a "head office" that existed in no country at all. The Court of Justice of the European Union confirmed that finding in September 2024, reversing a lower court and siding with the Commission. The named Irish structures that exploited all this, the Double Irish and the Green Jersey, are set out in full in the structures encyclopedia; we do not repeat the mechanics here.

The Netherlands: the pass-through

The Netherlands was, for decades, the world's premier conduit: the country corporate income flowed through on its way from a high-tax source to a zero-tax destination. The tools that made it work were a participation exemption (dividends and gains from qualifying shareholdings are exempt from Dutch tax), no withholding tax on dividends paid out to treaty partners, and, crucially, historically no withholding tax on royalties leaving the country at all. That last feature let a Dutch company receive royalties from across the EU and pass them onward to Bermuda or Cayman without anything being deducted, with almost no real activity required of the Dutch entity, the classic "letterbox company."

The Netherlands has since done more than most to close its own door. From 1 January 2021 it introduced a conditional withholding tax on interest and royalty payments to related companies in low-tax or blacklisted jurisdictions, starting at 21.7% and now standing at 25.8%; from 2024 it extended the same charge to dividends. The effect on the headline pass-through flow was large: by the Dutch government's own figures, payments to low-tax countries via the Netherlands fell from around 37 billion euros in 2019 to about 6.5 billion. The specific Dutch hybrid structures, the Dutch Sandwich and the CV/BV, are explained in the structures encyclopedia.

Luxembourg: the holding domicile

Luxembourg's role is to be the registered home of holding companies and investment funds for European and global groups. Its headline corporate rate is not especially low, at roughly 25% once municipal business tax is counted, but the rate paid is frequently a fraction of that, because of a participation exemption that fully exempts dividends, capital gains and liquidation proceeds from qualifying shareholdings, and a corresponding exemption from net wealth tax. The standard vehicle is the SOPARFI, a fully taxable Luxembourg holding company that nonetheless qualifies for every EU directive and the participation exemption; alongside it sit fund vehicles widely used by private equity and hedge funds.

Luxembourg's signature scandal was about secrecy rather than rates. In 2014, the LuxLeaks disclosure published around 28,000 pages of confidential Luxembourg tax rulings covering roughly 340 multinationals, and showed that in some cases the rulings produced effective tax rates of less than 1% on the profit routed through. The hundreds of multinationals named in the 2014 Luxembourg Leaks included global food-and-drink, furniture-retail, online-retail and entertainment groups; the rulings had been signed off by one of the large accountancy firms. LuxLeaks helped trigger the European Union's state-aid investigations and gave the OECD's base-erosion project much of its early momentum.

Switzerland: the discreet headquarters

Switzerland is the highest-placed jurisdiction on the Corporate Tax Haven Index that is not a British territory. Its effective corporate tax rate varies sharply by canton, from around 12% in Zug to around 21% in Zurich or Bern, and it offers preferential cantonal treatment of income from intellectual property and a "principal company" structure that concentrates a group's commercial risk, and therefore its profit, in a low-taxed Swiss entity. Its treaty network runs to more than a hundred agreements, and its arrangement with the EU sets a zero rate on qualifying intra-group dividends. Switzerland has, by deliberate design, no controlled-foreign-company rules and limited anti-avoidance provisions for businesses.

Like Ireland, Switzerland now applies the global minimum tax: a domestic top-up tax from 2024, with the income-inclusion rule following in 2025, so the lowest cantonal rates are topped up to 15% for the largest groups.

What the EU has done

The European Union has aimed a series of legal instruments at exactly these conduits. The Parent-Subsidiary Directive (1990, with an anti-abuse rule added in 2015) removes double taxation on dividends moving between EU companies. The first Anti-Tax-Avoidance Directive (ATAD I, in effect from 2019) brought in a cap on interest deductions, a general anti-abuse rule, exit taxation and controlled-foreign-company rules; the second (ATAD II, in effect from 2020, with reverse-hybrid rules from 2022) extended the rules on hybrid mismatches to non-EU situations. The EU also maintains a blacklist of non-cooperative jurisdictions, and from 1 January 2024 it has applied the 15% global minimum tax through its Pillar Two Directive. The 2024 state-aid ruling against a US technology group confirmed something structural: the Commission can challenge an individual country's tax ruling as illegal state aid where it departs from the normal application of that country's own law.