CRH, Ireland’s largest indigenous multinational, has a subsidiary in Luxembourg that has fixed assets of €2.5 billion but no staff.
The company appears to fit with the type of special purpose entities (SPE) that have featured in the leaked PricewaterhouseCoopers documents that have created controversy this week about Luxembourg’s tax policies.
CRH is not mentioned in the leaked PwC files published by the International Consortium of Investigative Journalists in Washington DC, but accounts filed in the Luxembourg companies registry record the scale of the funding travelling through CRH North America Luxembourg Sarl.
The subsidiary is part of the building material group’s global tax and treasury structure and its accounts show huge sums being transferred within the group by way of Luxembourg.
Reduced tax bills
The so-called advanced tax agreements that make up much of the leaked PwC files feature a large number of SPEs that help multinationals to reduce their tax bills outside Luxembourg.
Usually a Luxembourg subsidiary borrows money interest-free from their parent and lends it to other group companies and charges them interest which they claim against tax.
The interest-income in Luxembourg remains largely free of tax. In most cases the agreements include small profits that will be subjected to Luxembourg’s 29 per cent corporation tax rate.
The accounts of CRH North America Luxembourg Sarl show it had shares in affiliated companies of €177.69 million and loans out to group companies of €2.32 billion at the end of 2012. It owed other CRH companies within the group €2.16 billion at the year’s end.
The accounts show the company had no wage or social security costs during the year, or in the previous year. It made a profit of €55.8 million and paid tax of just €379,767.
It is not known whether the CRH company in Luxembourg has negotiated advanced tax agreements with the tax authorities there. A spokesman for CRH said the company would not comment on that.
In relation to CRH North America Luxembourg, he said the name “indicates its ownership and its purpose: to provide finance to CRH group companies, primarily those in North America”.
The accounts of the Luxembourg company were filed annually with the Registre de Commerce et des Sociétés in Luxembourg, he said. “When funding companies within the group to facilitate their operations, full consideration is given to the most efficient and cost-effective way of achieving this, while fully complying with all relevant laws and regulations.”
According to the accounts the function of CRH North America Luxembourg is to acquire, manage, enhance and dispose of “participations” in Luxembourg and abroad.
The company owns three Irish CRH subsidiaries: CRH Luxembourg Finance Ltd, CRH Luxembourg Finance (Europe) Ltd and CRH Luxembourg Finance Canada Ltd. The accounts detail huge loans involving these and other companies and the interest rates that applied, as well as enormous, interest-free transactions involving promissory notes.
On December 17th, 2009, the Luxembourg company issued three seven-year loans, for $700 million, $500 million, and $300 million to US subsidiary Oldcastle Finance Inc, according to the accounts. It also issued a $250 million loan to CRH America Inc. The interest on the loans was the applicable federal rate as provided by the US tax authorities.
Promissory note
On the same day in 2009, the Luxembourg company issued a $1.6 billion, interest-free promissory note to its Irish subsidiary, CRH Luxembourg Finance Ltd. Also on that day, the Luxembourg company issued interest-free subordinated promissory notes to Irish companies CRH Luxembourg Finance Ltd and CRH Luxembourg Finance (Europe) Ltd for $122.5 million and €30.7 million respectively.
On December 8th, 2010, the Luxembourg company issued a loan of €438.8 million to CRH Finland OY, at a fixed annual rate of 6.5 per cent. On the same day, it issued a €408 million, interest-free promissory note to Irish subsidiary, CRH Luxembourg Finance (Europe) Ltd.
The directors of the Luxembourg company are: Ruud Cohen, with an address in Holland; Christine Louis-Haberer and Emmanuel Reveillaud, both with addresses in Luxembourg; and Patrick O’Shea, with an address in Dublin. Mr O’Shea is group taxation director of CRH. The directors of the Irish company CRH Luxembourg Finance Ltd include CRH chief executive Albert Manifold.
The Luxembourg company’s accounts are filed in the EU member state’s company registry. The accounts of its Irish subsidiaries are not filed in Ireland, as the consolidated CRH accounts are filed in their place. The Luxembourg subsidiary is not mentioned in the 2012 annual accounts of CRH.
The Luxembourg company’s accounts say that since 2009 it has been investing part of the interest it gets from dollar-denominated loans in the Irish company, CRH Luxembourg Finance Ltd, via quarterly cash contributions. During 2012 the contributions totalled $18.9 million.
Since 2011, similar payments have been made to CRH Luxembourg Finance (Europe) Ltd, from the interest received on euro-denominated loans to CRH subsidiaries. In 2012 the amount was €36.6 million.
