>>674118here's a kek real world case:
1. blackrock (((investment company))) wants to invest in real estate in the netherlands
2. for this purpose, blackrock creates several (new) dutch legal entities and holds the stock in all of them*
3. in order to finance the real estate in the netherlands, the dutch legal entities acquire loans from a luxembourgish legal entity (ultimately owned by blackrock as well)
4. dutch legal entities buy real estate in the netherlands with funds from the loans
5. real estate is rented out, resulting in taxable income
6. but this taxable income is entirely set off by the interest paid on the loans, which results in no profit at the level of the dutch legal entities (and therefore no dutch corporate income tax is owed)
7. as per national law, there is a 25% 'withholding tax' on income sources arising in the netherlands and paid to foreign entities (i.e. the interest in this example)
8. … but this tax is mitigated to 0 % by the tax treaty between luxembourg and the netherlands
9. the dutch rental income from blackrock investments is at the level of the luxembourgish legal entity right now (without any tax levied on it so far)
10. how did the luxembourgish legal entity acquire the funds to provide a loan to the dutch legal entities? by acquiring a loan from a legal entity that is a tax resident at a tax haven (with 0% corporate income tax)
11. therefore, the tax burden is completely eliminated at the level of the luxembourgish legal entity as well (taxable income in the form of interest from loan to dutch legal entities - deductible interest paid to legal entity @ tax haven)
12. end result: dutch rental income from blackrock investment is @ tax haven without any tax levied on it, afterwards dividends to shareholders can (usually) be paid without any tax
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