LAST UPDATE | 30 Sep 2021
PHARMACEUTICAL COMPANY PERRIGO has settled its €1.6 billion tax bill with the Revenue Commissioners for under €300 million.
The Irish-registered firm — formerly known as Elan before it was acquired by Perrigo in 2013 — was hit with the revised tax assessment by the Revenue in 2018 over alleged underpayment of tax relating to a transaction with rival pharma company Biogen.
The revised assessment related to Perrigo’s tax treatment of income generated by the sale of its intellectual property rights to a multiple sclerosis drug called Tysabri.
Revenue categorised this sale as a capital transaction rather than a trading transaction, meaning it was subject to an effective tax rate of 33% rather than the standard 12.5% corporation tax rate.
Perrigo failed to overturn the revised tax bill in the High Court in November last year but the company also had an outstanding appeal before the Tax Appeal Commission.
In a statement last night Perrigo said, “While the Company believes that its tax position was correct and would ultimately have been confirmed by the Tax Appeals Commission, given the risks inherent in any litigation, as well as the ongoing costs of what could have been years of litigation and the uncertainty that would create, the company and Irish Revenue have agreed to settle this matter.”
According to the terms of the settlement, Perrigo said it “agrees” to pay €297 million to the Revenue.
However, the drugmaker said will be given credit for certain “taxes already paid” and unused tax credits related to research and development, which will shrink Perrigo’s final cash payment to €266.1 million.
“The settlement provides that no interest is due and no penalties apply,” according to the statement.
Perrigo said it has received confirmation in writing from the Revenue that it accepts the terms and expects to execute a formal settlement agreement over the coming days.
In a statement this morning the company said that while it believes its tax position was correct Perrigo said that given the risks of a continued legal battle it had agreed to settle with Revenue.
Murray S. Kessler, Perrigo President and CEO said settling the tax bill was in the best interests of the company’s “stakeholders”.
“As it removes a major uncertainty that has been a significant distraction to the Company over the last three years.
“While we continue to believe that our tax positions were correct and would ultimately have been confirmed through the tax appeal process, we recognize that this process was uncertain and could take many more years to complete.
“With what was once a multi-billion dollar uncertainty behind us, Perrigo can focus all of our efforts on delivering on our Consumer Self-Care vision and long-term value,” he said.
Perrigo will pay the €266.1 million to Revenue within seven days after the parties execute the settlement agreement. The Company expects to fund this settlement through cash on hand.
Separately, Perrigo announced that it has received €355 million in cash on behalf of Alychlo NV and Holdco I BE NV (“Sellers”) in an agreed arbitration payment.
The award was issued on 27 August, 2021, by a tribunal sitting under the rules of the Belgian Centre for Arbitration and Mediation and related to claims arising under the Stock Purchase Agreement between Sellers and Perrigo Ireland dated in November, 2014.
Under Belgian law, Sellers have the right to challenge the tribunal’s award for up to three months following the date of the award.
With reporting from Niall O’Connor.
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