Corporate Tax

Perrigo Case – “Legitimate Expectation”

In a previous issue we had written about Revenue issuing a notice of assessment on Perrigo, a large pharmaceutical company, demanding c. €1.6 billion in corporation tax. In short, the liability had arisen from Revenue’s belief that a sale of Intellectual Property by then Elan in 2013 was not actually part of Elan’s trade, where the profit would have been taxable at 12.5% but instead should have been treated as a capital gain liable to an effective tax rate of 33%. As Perrigo subsequently acquired Elan and its business they are responsible for the underpayment of the liability. Perrigo appealed this Notice of Assessment and the case is listed with the Tax Appeals Commission who will ultimately make a determination.

However, what is interesting is that Perrigo is taking a two pronged approach against the notice of assessment. As mentioned above they are appealing the notice of assessment through ordinary avenues but they have also sought a Judicial Review of Revenue’s treatment in the High Court. In the case before the High Court, Perrigo has argued that the tax treatment of sales of Intellectual Property rights to drugs by then Elan over a twenty year period means that Perrigo should have a “legitimate expectation” that Revenue would accept that trading treatment applied to the sale of the rights of the disputed drug. At its most basic, the doctrine of legitimate expectation is based upon the idea that where a public body states that it will or will not do something, a person who has reasonably relied on that statement should be entitled to enforce it. The “legitimate expectation” argument put forth by Perrigo is also based on the fact that over the years Revenue had audited Elan and this issue had never arisen.  Therefore, they had a legitimate expectation that Revenue would not challenge the treatment. In effect, Perrigo are arguing that the Revenue Commissioners didn’t have the legal right to raise the assessment. The High Court has now heard the submissions made by both Perrigo and the Revenue Commissioners and will give judgement at a date yet to be determined.

This is not a tax case per se, and the High Court is not being asked to consider the underlying technical tax point. The Tax Appeals Commissioner will have to make a determination on this matter in due course. The claim for legitimate expectation however is a very interesting argument and the decision by the High Court may have far reaching implications for other parties. The outcome is being keenly watched by tax advisors and we will provide further updates on the case.

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Ronan McGivern

Taxation Partner

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Tax Issue - Summer 2020 137.61 KB

Whilst Covid-19 has occupied the minds of most businesses for the last three months, the world of taxation does not stop. In this issue we provide an overview of the recent High Court case involving Perigo, which has raised some very interesting questions in relation to concepts of legitimate expectative in Irish tax law. We also review a number of interesting recent determinations of the Tax Appeals Commissioners. We look at updated Revenue guidance notes in relation to short term business visitors undertaking employment duties in Ireland. Finally we provide a summary of some international tax developments that Irish corporates need to be aware of including the changes in Ireland’s transfer pricing regime with effect from accounting periods beginning on or after 1 January 2020 and DAC 6 reporting obligations.