A US multinational has taken a $1.26 billion (€1.05 billion) dividend from its Irish unit to take advantage of a US tax concession introduced last year by President Bush.

The dividend from drug-maker Forest Laboratories Ireland Ltd to its parent in New York was paid out as foreign groups repatriated a greater proportion of their profits last year than in 2003.

This meant that the overall level of retained earnings fell last year, a result of which was a reduction in the flow of foreign direct investment, particularly in the final quarter of the year.

While economists have speculated that the increased repatriation of profits was due to favourable tax changes introduced last October by Mr Bush, Forest Laboratories Ireland is the first Irish-based company to acknowledge using the scheme.

The company employs 160 people at a 130,000 square foot factory in Clonshaugh, north Dublin, producing medical tablets for the US market.

A sister company in Baldoyle produces Sudocreme for the world market.

Mr Bush introduced the American Jobs Creation Act as part of an effort to encourage US companies to use the returned funds to create domestic jobs.

The funds can also be used for research and development, capital expansion or mergers and acquisitions in the US market.

For a period of one year, the law allows US companies to repatriate earnings of their foreign subsidiaries at a reduced tax rate of 5.35 per cent, down from the maximum corporate tax rate of 35 per cent.

Multinationals known to have used the scheme include Kellogg, the cereal maker.

A spokesman in Dublin for the Forest Laboratories Ireland confirmed that the company increased its $5.2 million dividend in the year to March 2004 to $1.26 billion in the following to avail of the scheme.

In its annual accounts for the year, the company's parent Forest Laboratories Inc indicated that $1.239 billion of this dividend was repatriated under the scheme.

It took a one-off charge of $91 million related to taxes associated with this repatriation.

Annual accounts newly filed for Forest Laboratories Ireland Ltd show that it paid Irish corporation taxes of $62.58 million in the year to March, 2004, in respect of a pretax profit of $607.87 million on sales of $1.72 billion.

In the previous year, the company paid corporation taxes of $35.16 million from a pretax profit of $314.19 million on sales of $1.02 billion.

Because the pharmaceutical company produces product as a subsidiary within a group-wide supply chain process, the higher level of its sales and profits does not necessarily reflect a real increase in business year-on-year.

Following the increased dividend, the shareholders' funds in Forest Laboratories Ireland fell to $585 million at the end of the most recent financial year from $1.3 billion a year earlier.

With retained profits of $273.83 million at the start of the financial year, the dividend left the company with retained losses of $714.7 million at the end of the year.