[nichol4s]

My understanding is as follows: the Dutch shell company is a parent (holding) company which basically holds shares in a subsidiary. If the holding company owns more than 95% of the shares of its subsidiary it acts as a single fiscal unit, allowing it to be taxed as one. Now, if the parental company has multiple subsidiaries it enables the holding to settle costs of the one, with the profits of the other.

But, the main thing that the Dutch tax system enable, is that you can sell the shares of a subsidiary and hold the profits within the parental company (for the purpose of re-investing) without the need to pay taxes. This enables companies to quickly 'move' subsidiaries around the world without any tax consequences.

This opens up an enormous amount of opportunity for creative tax lawyers who thrive in this grey area. International tax rules are so complex and the stakes so high that in the end they can just negotiate an 'acceptable' tax rate on a government level. Where, in the end, if the government does not agree, they can just 'move' their business somewhere else.