> What loopholes do they use to pay next to no taxes?
Principally routing investment gains through a series of entities, each which assesses transaction expenses, until no taxable gains are left. Luxembourg, Andorra and the Isle of Man are favourites for extracting income. The fixed cost of this plumbing is high, so it only makes sense if you’re investing €10+ million at a time. But it surprised me when I first saw how complicated simple European transactions were compared to American ones. (The former would route through a menagerie of family trusts, companies and other entities. The latter, at worst, would route through a Delaware LLC or Cayman LP.)
Thanks for the overview. That does sound kind of like a nightmare to do anything with. I wonder if the tax savings are really worth the increased friction in every deal... I guess above a certain deal size it becomes worth it.
They don't have a lot of income. Their companies have.
The companies can be hold, to some degree, in offshore jurisdictions, by trust funds or low tax countries (Liechtentein, Andorra, Isle of man etc.).
Many countries have some kind of exemption for specific taxes. E.g. tax all your IP royalties in a Luxembourg company with 5%. Lawyers at Deloitte and other companies working 24/7 to find such loopholes and find solutions for their clients.