Pharmaceutical company Perrigo has agreed to a settlement of nearly 300 million euros with the tax authorities over a tax bill according to the Irish authorities.
The € 297 million settlement is one of the largest on record here, but is only a fraction of the € 1.64 billion tax assessment the Revenue Commissioners received in 2018.
A High Court ruling in November last year that upheld the 2018 assessment, but Perrigo had taken his case to the Tax Appeals Commissioner, with a hearing scheduled for November this year.
In 2018, the Revenue Commissioners said Perrigo owed the € 1.64 billion tax claim following its 2013 acquisition of Irish pharmaceutical company Elan. Eight months prior to this acquisition, Elan had sold 50% of the treatment. from multiple sclerosis Tysabri to the US pharmaceutical company Biogen. .
Elan received an initial cash payment of $ 3.25 billion from Biogen, along with an ongoing royalty stream.
The initial proceeds from the sale were accounted for by Elan as trading income, which attracts a corporate tax rate of 12.5pc.
But the revenue commissioners argued that the cash should have been treated as capital gains, taxable at 33pc.
Judge Denis McDonald concluded last November that Perrigo had established no basis for the court to interfere with Revenue’s Notice of Assessment (NoA).
But he had stressed that the question of whether the divestiture of Tysabri’s intellectual property constituted a business transaction or a capital transaction is an issue that will need to be resolved in due course before a tax appeals commissioner.
Perrigo told shareholders in its last annual report that the November High Court ruling was not final in terms of money and determined that the company’s constitutional rights and legitimate expectations as a taxpayer are no had not been violated.
“The Irish High Court has not considered the technical merits of the NoA under Irish law,” Perrigo said in his annual report.
“The Tax Appeals Board will now examine whether the NoA is correct with regard to Irish tax law, which is currently expected to be heard in November 2021,” he added.
No payment had been made or demanded from Perrigo until the decision of the Tax Appeal Board.
After announcing his settlement, Perrigo said he believed his tax position was correct and would eventually have been upheld by the Tax Appeal Board, but “given the costs and uncertainty of the litigation, the company and Irish Revenue agreed to settle this matter “.