The multinational pharmaceuticals group
Shire opened a one-person Irish branch office in 2008 to which it allocated $3.78 billion in capital from Luxembourg as part of a scheme aimed at avoiding tax.
Although the branch immediately lent the money back to the Luxembourg company from which it got it, the transactions meant the money avoided being subject to a wealth tax in Luxembourg.
In order for the scheme to work, the Irish branch of Luxembourg company, Shire Holdings Europe No 2 Sarl, had to be considered permanently established in this jurisdiction and, therefore, taxable here.
PwC Luxembourg, in a letter in January 2009 to Marius Kohl of the Luxembourg tax authorities, said the branch would have an Irish office space with fax and phone, a company name displayed on the premises, a telephone number listed in the public phone book, its own bank account and separate accounting records. "At least one manager will be appointed."
For these and other similar reasons, the branch would qualify as being tax resident in the State. This would mean that the assets transferred to the Irish branch would not be subject to Luxembourg’s wealth tax. The tax carries an annual rate of 0.5 per cent (0.5 per cent of $3.78 billion is €18.9 million).
The letter to Mr Kohl said €13.6 million of the assets held by the Luxembourg company would remain in Luxembourg and be subject to the net wealth tax. Mr Kohl approved the analysis set out in the letter, meaning the documents constituted an advanced tax agreement.
In a statement to The Irish Times, Shire said the Luxembourg company was part of its overall treasury operations and that its responsibilities to its shareholders included managing its tax affairs. "We comply fully with Luxembourg tax law based on our activities there and with all relevant tax legislation in the countries in which we operate."
