This paper is concerned with tax-planning strategies of multinational corporations. A theoretical analysis discusses the choice of the capital structure in a setting where intercompany loans can be used to shift profits to low-tax countries. Empirical evidence is provided using micro-level panel data of virtually all German multinationals made available by the Bundesbank. This comprehensive dataset allows us to exploit differences in taxing conditions of almost eighty countries during a period of nine years. The empirical results confirm a robust impact of tax-rate differences within the multinational group on the use of intercompany loans, supporting the profit-shifting hypothesis. However, the implied tax-revenue effects are rather small, suggesting that costs related to adjusting the capital structure for profit-shifting purposes are substantial.