Dell sees $4.9bn corporate tax benefit from Irish asset move
US tech firm transferred IP to subsidiary here earlier in 2019
Dell, a US multinational computer technology company, has accrued $4.9bn (€4.4bn) in tax benefits through transferring intellectual property (IP) to an Irish subsidiary.
The IP, which can include patents, copyrights, trademarks, licences, computer software, brands and know-how, was passed to an Irish subsidiary over two intra-entity asset transfers in 2019.
The tax benefit of $4.9bn was recognised as a deferred tax asset during the second quarter of Dell's 2020 financial year.
Both asset transfers were reported in recent company filings in the US by Dell and its subsidiary VMware, which was acquired by Dell when it purchased technology company EMC in 2016.
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The deferred tax asset was recognised as a result of the previous book value Dell had calculated, and the tax basis difference on the IP transferred to Ireland.
Before the transfer, the IP assets had a particular book value in Dell's accounts. This value was based on Dell's estimate of the total future after-tax profits from those assets over their remaining useful life.
After the transfer, Dell had to revalue these assets, based on the applicable Irish tax rates. The company decided that the value of these assets was $4.9bn higher than the previously calculated book value.
The tax benefit related to the IP is to be spread over future periods. Any of this type of amortisation which remains unused in a particular year can be carried forward indefinitely under Irish tax laws.
In a Securities and Exchange Commission filing submitted by Dell in the US, the company said it "expects to be able to realise the deferred tax assets resulting from these intra-entity asset transfers". The Dell comment means that the saving in tax on the profits from these assets is set to be realised in cash over time.
According to a US filing by VMware, the IP transfer was done on the basis that Ireland is the headquarters for Dell's international business.
"[The] transaction will change the company's mix of international income from a lower non-US tax jurisdiction to Ireland, which is subject to a statutory tax rate of 12.5pc," the filing said.
"However, the company does not expect its effective income tax rate to increase significantly in fiscal 2020, as it expects the income earned in Ireland will largely be offset by certain tax deductions."
Tax sources said the transfer by Dell was an example of the on-shoring of IP to Ireland by multinationals in recent years, which has boosted GDP figures. Sources added that projects, directives and policy from both the OECD and EU meant more multinationals were on-shoring IP to Ireland as opposed to retaining it in countries where they had small operations.
A spokeswoman for Dell said the company complies with tax laws across all jurisdictions in which it operates. Dell employs 6,000 people in Ireland at campuses in Cork, Limerick and Dublin, with a number of global and European teams based in the country.