The Irish subsidiary of BMC Software paid its US parent a dividend of $3 billion (€2.1 billion) last year, despite only booking a pretax profit of $15.1 million, writes John Collins.

Accounts for BMC Software Europe to the end of March 2006, which were recently lodged with the Companies' Registration Office, show that following the payment of the dividend, it had a loss of $83.3 million.

The dividend payment was facilitated by a transfer from its share premium account of $2 billion. The company, registered in Merrion Square, Dublin, paid Irish tax of $3.5 million.

The decision to pay such a large dividend was likely to have been to avail of a tax amnesty offered by the US authorities in 2005.

This allowed US companies with overseas operations to repatriate profits and to pay 5.35 per cent in corporation tax rather than the full rate of 35 per cent.

BMC Software Europe handles the European manufacturing and distribution for BMC Software, a specialist provider of software for managing IT systems. Quoted on the New York Stock Exchange, the ultimate parent of the Irish operations had net earnings of $102 million for the 2006 financial year.

BMC Software Europe is held by an Irish-registered entity, the European Software Company, which has two directors in common and describes its principal activity as acting as a holding company. Notes to its 2006 accounts suggest the massive dividend payment was a one-off transaction.

"No future dividend incomes are foreseen nor are there plans for the company to recommence trading in the foreseeable future," the accounts note.

Accounts for the European Software Company show its only income was the $300 million payment from BMC Software Europe. It did not pay any tax on profits last year as dividend payments between Irish companies do not attract tax. The company was set up in 1988 as a subsidiary of Boole and Babbage, a Silicon Valley software company that BMC acquired in 1998. The European Software Company has not traded since 2000 and it is administered from an address in The Netherlands.

It made a $300 million dividend payment to BMC Software European Holding, its parent company, which is also registered in Dublin but considered resident in the Cayman Islands.

BMC Software Holding had a 2006 pretax profit of $282 million and paid a dividend to BMC Software of $828 million after transferring €625 million from its share premium account. Due to its Caymans status, it did not pay any corporation tax.

The administration office for BMC Software European Holding is the corporate headquarters of BMC in Houston, Texas.

Despite a number of telephone calls, BMC Software did not provide anyone to comment on the accounts.