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Double Irish, Dutch Sandwich and Silicon Valley

It’s no real IQ test or secret among boards, investors, executives,entrepreneurs and investors all alike. From startups to ones gone IPO, that the best leverage of tax regimes take decisions on where to base their companies assets and liabilities. Solve key questions. Where to register their corporate, their IP, revenue flow, costs and labor, that are the measure of impact in the balance sheet, which may be tens or hundreds of millions of dollars. Tax regimes as incentives at heart may be a critical component to growth of industries from Silicon Valley and Ireland to Israel to India. That’s why from Double Irish and Dutch Sandwich to the STP tax regime in India, structuring your company around a beneficial tax regime framework and meet GAAP compliance is the key to your company.

I meet a lot of entrepreneurs, investors and executives who often talk about their business plan but which often has a missing piece of conversation when it comes to equity structuring. How to best structure so as to leverage IP and revenue which will enable a greater investment in  the business to accelerate innovation and meet GAAP guidelines and compliance. The goal should be how to pay taxes and yet get the best bang for the buck for innovation.

It’s headlines like these that getting a lot of attention on how to deal with international regulation that enables this flow of capital and IP and drives profitability in balance sheets of a lot of innovative and large corporations.

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http://www.nytimes.com/interactive/2012/04/28/business/Double-Irish-With-A-Dutch-Sandwich.html

Of Course Twitter Is Using The Double Irish With A Dutch Sandwich, They’d Be Mad Not To http://www.forbes.com/sites/timworstall/2013/10/19/of-course-twitter-is-using-the-double-irish-with-a-dutch-sandwich-theyd-be-mad-not-to/

Taking a bite out of the Double Irish-Dutch Sandwich
Prem Sikka outlines how global brand names avoid paying taxes on an industrial scale – and what could be done about it
http://www.tribunemagazine.org/2013/11/taking-a-bite-out-of-the-double-irish-dutch-sandwich/

Israel offers favorable tax regime for companies
“Globes” and Baker Tilly Israel accountants found Israel’s tax benefits are among the most attractive in the West.
http://www.globes.co.il/serveen/globes/docview.asp?did=1000897037

After all what really grew the software services industry into a $100B industry? It was simply the Tax benefit of the STP scheme by the government of India that played a critical role, without which may not be competitive at all just on being a low cost supplier.

IT firms seek STPI scheme extension
http://www.nasscom.in/IT-firms-seek-STPI-scheme-extension-56717

Screen Shot 2013-12-02 at 11.43.58 AM

KMPG – IndianIT/ITeSIndustry Expiry of income-taxholiday: needs re-examination
http://www.kpmg.com/IN/en/ThoughtLedership/Indian%20IT%20-%20ITeS%20Industry%20-%20Expiry%20of%20income-tax%20holiday-%20needs%20a%20re-examination_ICE.pdf

Nasscom to recast executive council; targets $300 billion by 2020
http://articles.economictimes.indiatimes.com/2013-03-05/news/37438164_1_nasscom-pramod-bhasin-narayana-murthy

From a Delware Inc. or a company registered in Israel or in London, Singapore or for that matter anywhere else in the world, this is a critical conversation that the vast majority of startups miss and as as they scale internationally the cost of change can be tedious, time consuming and cost a lot to the founders, employees and shareholders alike.

I had written about equity structuring and how IP based companies and tech leverage the model of Double Irish, Dutch Sandwich to further deliver greater ROI & ROE. From a small group discussion on how to structure a company internationally to best leverage the existing frameworks of capital & revenue flows, tax and profitability.

Structuring a company is a critical component of any business, whether startup or public. This is where the value for the company as well as shareholders gets the benefit of structuring.  The Double Irish is in the news and companies and governments alike are working to close frameworks such as these.

“DOUBLE IRISH”, TAX LEVERAGE AND STRUCTURING OF IP COMPANIES
https://gerardjrego.com/2013/09/13/double-irish-tax-leverage-and-structuring-of-ip-companies/

There’s been a lot of talk about the model, Ireland, EU and the issues, but some of these headlines are worth noting.

Of Course Twitter Is Using The Double Irish With A Dutch Sandwich, They’d Be Mad Not To http://www.forbes.com/sites/timworstall/2013/10/19/of-course-twitter-is-using-the-double-irish-with-a-dutch-sandwich-theyd-be-mad-not-to/

Cantillon: IMF bites ‘Double Irish Dutch Sandwich’
The sandwich, says the report, is a device ‘popularly associated with Google’
http://www.irishtimes.com/business/economy/ireland/cantillon-imf-bites-double-irish-dutch-sandwich-1.1555462

The Endangered Double Irish Could Make Apple, Google, Twitter And Others Pay Way More Taxes
The Endangered Double Irish Could Make Apple, Google, Twitter And Others Pay Way More Taxes

Q&A: How multinationals use Ireland to lower their tax bills
http://www.ft.com/intl/cms/s/0/46e44b6c-c203-11e2-ab66-00144feab7de.html#axzz2mDXUIkAQ

The bottom-line is if you really want to do a startup, or an existing company that’s ready to scale it may be a good time to look at how you are structured to best deliver value to all stakeholders you want to look at with the right advisors. It’s clear that the best companies in the Silicon Valley are structured to drive innovation and leverage their IP and profit to accelerate the next cycle to avoid mortality, which is only 18 months away.  So whether a Silicon Valley startup, an Israeli company, a company in London, Ireland or Singapore or software services companies in India, the ability to leverage a supportive tax regime seems to be the heart of every company and the very industry’s growth.

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