Businessman Denis O'Brien is expected to return to live in Ireland next month after living abroad for two years, a move which saved him about £50 million (€63 million). When Mr O'Brien sold his stake in Esat Telecom for £250 million in early 2000 he moved with his family to live in Portugal at the Quinta do Lago estate, which he bought in 1998 for £25 million.

While he has not confirmed that he moved for tax reasons, he has benefited from a tax treaty between Ireland and Portugal. Under the terms of the treaty, if Mr O'Brien showed he had his main residence in Portugal and spent 183 days there, he was entitled to be treated as a Portuguese resident for tax purposes.

This meant he did not have to pay any Capital Gains Tax on his profit on the sale of the Esat stake - virtually the entire £250 million - because at that time there was no capital gains tax in Portugal.

Mr O'Brien purchased the Quinta do Lago property well before he sold his Esat stake. Establishing that his main residence was in Portugal was made easier when he sold his Dublin home. While he did buy another Irish property in Dublin 4 - for £7 million - he did not occupy it, and builders have been restructuring the house for some months.

Mr O'Brien has spent a considerable amount of time in the Republic this year, between attendances at the Moriarty tribunal where he was questioned about a political contribution to Fine Gael soon after Esat won the second mobile phone licence, at the Dβil inquiry into overspending on the CI╔ rail signalling system, and preparing for his failed bid for Eircom.

But as one tax adviser pointed out, he will have been careful to ensure that he spent the required 183 days in Portugal.

At the time of the Esat sale, Capital Gains Tax was charged at a rate of 20 per cent in the Republic - cut from 40 per cent in the 1997 budget. But there was no CGT in Portugal, where a 10 per cent rate has since been introduced. Portugal operates on a calendar tax year, while Ireland is changing to a calendar year from January 1st.

Mr O'Brien could possibly have come back to Ireland in 2001 and still avoided any liability for CGT here. But tax experts said the differences in the tax years in the two jurisdictions could have lead to complications and it would have been safer to spend two years in Portugal to ensure no liability arose in Ireland.

Moving abroad for a year or two to avoid liability for CGT on profits on the sale or disposal of property or other assets was not uncommon among business people and wealthy families before 1994. The usual destination was the UK. All the seller had to do was establish residency in the UK for the tax year in which the sale took place. But in 1994, the tax rules changed to make people liable for CGT if they were resident or ordinarily resident in the Republic. This closed off the avoidance route of going to the UK for a year because an Irish person living in the UK for a year would still be ordinarily resident in the Republic for tax purposes for three years after they moved.

However, tax advisers found another avoidance route in the reciprocal tax treaties with Portugal and Spain. These treaties established the rules for deciding which country was to be treated as the residence of the individual for tax purposes. Where a person is established as resident in one state - Portugal, for example - his/her capital gains are only taxable in that state, even though the disposal which gave rise to the gain took place in another state, for example Ireland.