Tax treaty shopping: structural determinants of Foreign Direct Investment routed through the Netherlands
- Francis Weyzig
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Many multinationals divert Foreign Direct Investment (FDI) through conduit countries that have a favorable tax treaty network, to avoid host country withholding taxes. This is referred to as tax treaty shopping. The Netherlands is the world’s largest conduit country; in 2009, multinationals held approximately €1,600 billion of FDI via the Netherlands. This paper uses microdata from Dutch Special Purpose Entities to analyze geographical patterns and structural determinants of FDI diversion. Regression analysis confirms that tax treaties are a key determinant of FDI routed through the Netherlands. The effect of tax treaties on FDI diversion partly arises from the reduction of dividend withholding tax rates, which provides strong evidence for tax treaty shopping.
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- Tax treaty shopping: structural determinants of Foreign Direct Investment routed through the Netherlands
International Tax and Public Finance
Volume 20, Issue 6 , pp 910-937
- Cover Date
- Print ISSN
- Online ISSN
- Springer US
- Additional Links
- Treaty shopping
- Tax treaties
- Foreign direct investment
- Withholding tax
- Special purpose entities
- Industry Sectors
- Francis Weyzig (1)
- Author Affiliations
- 1. Utrecht University, Heidelberglaan 2, 3584 CS, Utrecht, The Netherlands