International Tax and Public Finance

, Volume 20, Issue 6, pp 910–937

Tax treaty shopping: structural determinants of Foreign Direct Investment routed through the Netherlands



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.


Treaty shopping Tax treaties Foreign direct investment Withholding tax Special purpose entities 

JEL Classification

G32 H25 H32 

Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  1. 1.Utrecht UniversityUtrechtThe Netherlands

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