page_title: Corporate haven
section_title: Conduits and Sinks
hierarchical_section_title: Corporate haven / Aspects / Conduits and Sinks
caption_attribution_description: English: Uncovering Offshore Financial Centers
context_page_description: A corporate haven, corporate tax haven, or multinational tax haven, is a jurisdiction that multinational corporations find attractive for establishing subsidiaries or incorporation of regional or main company headquarters, mostly due to favourable tax regimes, and/or favourable secrecy laws, and/or favourable regulatory regimes.
  Modern corporate tax havens differ from traditional corporate tax havens in their ability to maintain OECD compliance, while using OECD–whitelisted IP-based BEPS tools and debt-based BEPS tools, which don't file public accounts, to enable the corporation to avoid taxes, not just in the corporate haven, but in all operating countries that have tax treaties with the haven.
  While the "headline" corporate tax rate in corporate havens is always above zero, the "effective" tax rate of multinational corporations, net of the BEPS tools, is closer to zero. Estimates of lost annual taxes to corporate havens range from $100 to $250 billion. To increase respectability, and access to tax treaties, some havens like Singapore and Ireland require corporates to have a "substantive presence", equating to an "employment tax" of circa 2–3% of profits shielded via the haven.
context_section_description: Modern corporate tax havens like Ireland, the United Kingdom and the Netherlands have become more popular for U.S. corporate tax inversions than leading traditional tax havens, even Bermuda. 
  However, corporate tax havens still retain close connections with traditional tax havens as there are instances where a corporation cannot "retain" the untaxed funds in the corporate tax haven, and will instead use the corporate tax haven like a "conduit", to route the funds to more explicitly zero-tax, and more secretive traditional tax havens.  Google does this with the Netherlands to route EU funds untaxed to Bermuda (i.e. dutch sandwich to avoid EU withholding taxes), and Russian banks do this with Ireland to avoid international sanctions and access capital markets (i.e. Irish Section 110 SPVs).
  A study published in Nature in 2017 (see Conduit and Sink OFCs),  highlighted an emerging gap between corporation tax haven specialists (called Conduit OFCs), and more traditional tax havens (called Sink OFCs).  It also highlighted that each Conduit OFC was highly connected to specific Sink OFC(s).  For example, Conduit OFC Switzerland was highly tied to Sink OFC Jersey.  Conduit OFC Ireland was tied to Sink OFC Luxembourg, while Conduit OFC Singapore was connected to Sink OFCs Taiwan and Hong Kong (the study clarified that Luxembourg and Hong Kong were more like traditional tax havens).
  The separation of tax havens into Conduit OFCs and Sink OFCs, enables the corporate tax haven specialist to promote "respectability" and maintain OECD-compliance (critical to extracting untaxed profits from higher-taxed jurisdictions via cross-border intergroup IP charging), while enabling the corporate to still access the benefits of a full tax haven (via double Irish, dutch sandwich type BEPS tools), as needed.
  We increasingly find offshore magic circle law firms, such as Maples and Calder, and Appleby, setting up offices in major Conduit OFCs, such as Ireland.
  A key architect [for Apple] was Baker McKenzie, a huge law firm based in Chicago. The firm has a reputation for devising creative offshore structures for multinationals and defending them to tax regulators. It has also fought international proposals for tax avoidance crackdowns.  Baker McKenzie wanted to use a local Appleby office to maintain an offshore arrangement for Apple. For Appleby, Mr. Adderley said, this assignment was “a tremendous opportunity for us to shine on a global basis with Baker McKenzie.”
  — The New York Times, "After a Tax Crackdown, Apple Found a New Shelter for Its Profits", 6 November 2017
caption: "Uncovering Offshore Financial Centers": Relationship of Conduit and Sink Offshore Financial Centres.
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