On February 1, 2018, lawyers at the Dublin corporate legal firm Matheson initiated a string of transactions by adding a new company to the roster of dozens they maintain on behalf of multinationals in Ireland. The company’s name was Symantec Technologies (Ireland) Ltd and it filed its first set of accounts last week for the period ending March 29, 2019.

They reveal movements in intellectual property (IP) common to an increasing number of American-based technology corporations, with multi-billion-euro transactions continuing at pace since the Trump administration reformed the way profits derived from intangible assets around the world are taxed in the US at the end of 2017.

Symantec Technologies (Ireland) Ltd is an indirect subsidiary of the global IT security giant Symantec Corporation, which has since changed its name to NortonLifeLock to focus on the consumer market after selling off its Symantec enterprise security business. 

Within weeks of registration, the new Irish company purchased intellectual property rights on March 29, 2018 from its immediate parent Symantec International Unltd for the “fair market value” of $7.2 billion. (One exception was IP associated with a recent acquisition in the US, BlueCoat, which was instead transferred to a Jersey entity for a value of $1.8 billion.)

Symantec International Unltd was registered in Ireland but domiciled in Jersey, where it paid no income tax – a structure typical of the double Irish scheme.

Once the IP transfer was done, Symantec no longer needed its half Irish, half Jersey company. The group registered another fully Irish company, Symantec Security Ireland Holdings Unltd, on March 13, 2018. This became the top holding company for the group’s subsidiaries in Ireland and Symantec International Unltd was merged into it three months later, having closed its final accounts on a $6 billion profit following the disposal of its IP – on which it paid just $403,000 in income tax under Jersey rules.

Of the $7.2 billion worth of intellectual property onshored to Ireland, the group gave $300 million to Symantec Technologies (Ireland) Ltd for free as a capital contribution. To cover the rest, the company contracted debt from its new parent Symantec Security Ireland Holdings Unltd under the form of two promissory notes. 

One was worth $2 billion and cancelled the next day.

The other note was worth $4.9 billion and Symantec Technologies (Ireland) Ltd began to pay it back as it charged royalties to other group companies who sell digital security services to customers. On June 1, 2018, it made a repayment of $568 million.

At the end of last year, however, things accelerated. On November 4, 2019, the Symantec group was split up. It became NortonLifeLock and sold its enterprise security business and the Symantec brand for $10.7 billion to another Silicon Valley veteran company, Broadcom. This was reflected in Ireland: on the same day, Symantec Technologies (Ireland) Ltd entered agreements with subsidiaries of Broadcom to transfer the corresponding intellectual property. 

The value and destination of Irish-based IP rights sold to Broadcom has not yet been reported: “The total consideration is subject to change in accordance with the provisions of the relevant agreements.” However, money clearly changed hands as a result of this initial agreement.

Symantec Technologies (Ireland) Ltd, which had no current assets as it closed its annual accounts on March 29, 2019, raided its trading subsidiary NortonLifeLock Ireland Ltd for cash under the form of a $260 million dividend and a $310 million interest-free loan. As soon as the loan was arranged on November 25, Symantec Technologies (Ireland) Ltd erased nearly all its outstanding debt linked to the 2018 onshoring of intellectual property through a $4.2 billion promissory note repayment to its parent – the balance presumably raised from the sale of enterprise IP to Broadcom.

When all costs were factored in, the company made a pre-tax loss of $273 million and paid $13 million in corporate tax.

On the same day, Symantec Security Ireland Holdings Unltd transferred the money on to the US as a $4.2 billion dividend to its parent. The structure to sell services around the world based on software and brand rights located in Ireland was in place and fully paid up. Company filings show that IP rights will be amortised over 20 years.

During its first year in existence, Symantec Technologies (Ireland) Ltd received additional IP rights worth over $50 million from the group’s US parent. In addition to its Irish subsidiaries NortonLifeLock Ireland Ltd and NortonLifeLock Global Unltd, it became the holding company for a string of companies in the UK, Mauritius and Singapore. Symantec Technologies (Ireland) Ltd charged $608 million in IP royalties to these customer-facing entities, which it entirely offset with its first of 20 annual tranches of $360 million in amortisation costs and $269 million in interests payable on intercompany loans.

In addition, Symantec Technologies (Ireland) Ltd is part of a cost-sharing agreement with the wider group for the development of intellectual property. It reported: “The company incurred research and development costs of $379 million during the period, all of which were expensed. The research and development costs consisted of research and development activities undertaken by the company and development services provided by related group companies.” When all costs were factored in, the company made a pre-tax loss of $273 million and paid $13 million in corporate tax.

Meanwhile, NortonLifeLock Ireland Ltd sold €1 billion worth of cybersecurity solutions such as Norton Antivirus in Europe, the Middle East and Africa. This is the job of the 511 employees at its Ballycoolin campus in north-west Dublin, where the average gross salary is €90,000. The company cut its development and support staff by more than half last year, focusing resources on sales instead. It did not disclose how much it paid in IP royalties to its parent, but it reported high costs that left it with just €32 million in pre-tax profit and €8 million in corporate tax.

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The series of corporate transactions conducted through Ireland by Symantec-turned-NortonLifeLock in the past two years illustrate the effort many tech multinationals have been going through to switch between two tax structures – from the double Irish to the green jersey. In both cases, corporations have found an alignment between shifting US and Irish tax rules to maximise profit.

While the high-profile example of Apple was well documented after the iPhone maker apparently onshored up to €200 billion worth of intellectual property in Ireland in 2015, many more have followed suit. 

On the one hand, this year marks the end of the double Irish scheme, whereby a group company domiciled in a jurisdiction with low or no income tax could charge intellectual property royalties to another taxed in Ireland. 

On the other hand, the Tax Cuts and Jobs Act (TCJA) passed by the US Congress in December 2017 has introduced new rules for the taxation of profits made by American companies overseas on the back of intangible assets such as patents, brands and software. Instead of being allowed to defer US tax indefinitely on profits stored in low-tax offshore structures such as those used in the double Irish, US-based multinationals now have two options.

• Locate IP and other intangible assets inside the US and export associated products and services. Profits derived from these exports are now treated as “foreign-derived intangible income” (FDII) and enjoy a reduced tax rate of 13.1 per cent, due to increase to 16.4 per cent after 2025 (instead of the new standard rate of 21 per cent). Google may be planning to take advantage of these provisions after it announced it was moving IP rights out of a central Irish-registered holding company in December. 
• Locate intangibles in overseas jurisdictions such as Ireland and enter the “global intangible low-taxed income” (GILTI) regime. This is what Symantec and others are ostensibly going for.

The TCJA regards profits accounting for 10 per cent of a foreign subsidiary’s tangible assets as bricks-and-mortar income. Any income beyond this is considered as GILTI and must be taxed at an effective rate of 10.5 per cent (due to rise to 13.125 per cent after 2025). Companies are allowed to deduct 80 per cent of taxes they pay on this income outside the US. 

For example, an Irish subsidiary of a US multinational paying 12.5 per cent tax can have a 12.5 x 0.8 = 10 per cent effective rate recognised by the US tax authorities, who will add 0.5 per cent to meet the minimum GILTI tax rate. This means the US multinational will pay a total of 13 per cent on profits from intangible assets located in the Irish subsidiary, which remains more attractive than the 13.1 per cent rate applicable if it made those sales out of the US.

This is before the definition of what constitutes profit enters into play. In Ireland, the capital allowance for intangible assets (CAIA) introduced in 2009 allows companies to book an amortisation charge in their profit and loss account for intellectual property, which is then “treated as machinery or plant” and depreciated through its useful life or during a set period of 15 years, according to the Revenue.

Budget updates later capped the allowance to 80 per cent of profits from intangible assets, but IP brought to Ireland between January 1, 2015 and October 11, 2017 – including the famous Apple transfer from Jersey to Ireland – remains eligible to the 100 per cent deduction. The CAIA regime, reinforced by GILTI rules in the US tax reform, has become known as the green jersey.

“The green jersey is basically a way of becoming a full-time tax resident of Ireland, but paying very low tax. This is done by depreciating the value of an IP asset and deducting the interest money notionally borrowed to buy the IP,” economist Brad Setser told The Currency.

Setser, who works on global capital flows at the New York-based Council on Foreign Relations, added that capital allowances against Irish-based intangible income could achieve effective tax rates as low as 3 per cent or less under GILTI calculations. “For example, if you pay 3 per cent in Ireland, 80 per cent of this is deductible. Your tax rate is then 8.1 per cent in the US to get to the 10.5 per cent GILTI rate.”

“The green jersey works well for companies that will take advantage of the GILTI provisions. Ireland gets a small cut.”

Brad Setser

The green jersey becomes even more attractive when considering that while many US tech multinationals have been locating much of their overseas activity in Ireland, they also have subsidiaries in jurisdictions where corporation taxes are higher, such as France or Germany. “Irish-located IP, furthermore, can be used to blend away the disadvantages of choosing to locate some IP or global intangible income close to where R&D is undertaken in higher-tax European economies,” Trinity Business School professor Frank Barry wrote in the Economic and Social Review last year. US tax authorities then consider the overall effective tax already applied to a multinational’s global intangible income before deciding a tax top-up to hit 10.5 per cent.

Another subtlety of the TCJA is the 10 per cent return on tangible assets that the US taxman will exclude from GILTI calculations. 

“You can depreciate 10 per cent of your tangible assets per year off your US GILTI tax base,” said Setser. “The key thing about the deemed return on tangible assets is that it’s independent of profits actually generated by that asset.”

According to Barry, this may encourage US companies to hold more tangible assets overseas in support of their foreign IP operations. “Recall that GILTI is the excess income earned by a company’s foreign subsidiaries over and above a 10 per cent rate of return on their tangible business assets. Holding more tangible assets overseas reduces the amount of such income – a factor remarked upon by numerous scholars,” he wrote. “While these tangible assets can be held anywhere overseas, this factor too has the potential to work to Ireland’s advantage.”

Aside from Ireland’s cool climate, this may be another incentive for tech multinationals to locate billions of euros of data centre investments in this country. Based on applications and enquiries for power capacity, Eirgrid estimates that the size of this business will be multiplied by between three and five over the current decade.

“The green jersey works well for companies that will take advantage of the GILTI provisions. Ireland gets a small cut,” said Setser. “US corporations have seen their tax burden reduce. Pre-TCJA and green jersey, there was a deferred tax liability. This became 15.5 per cent. The green jersey will allow them to achieve a tax rate well below 15.5 per cent.”

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Symantec is not the only US-based tech multinational to put on the green jersey since the TCJA became law. As previously reported, Ireland suspended the publication of quarterly national accounts on investment in intellectual property at the time when an Irish subsidiary of Microsoft acquired a Singapore company holding the group’s IP licenses for Asia last year, but Eurostat figures suggested a spike in the region of €30 billion at the time.

While not all transactions appear in this category, the graph below shows the continuing rush to locate IP in Ireland among corporations. 

From a base of 100 in 2010, investment in intellectual property remained on a steady trajectory through 2014 in both Ireland and the EU. Then from 2015, indexed figures show a first wave of onshoring into Ireland. Activity slowed down after an unprecedented spike mid-2017, before picking up again in the past two years. Meanwhile, figures in the rest of the EU remained broadly static.

Thanks to new reporting obligations, some individual transactions have recently appeared in the accounts published by Irish subsidiaries of tech multinationals. Since the start of 2018, those identified by The Currency totalled nearly €100 billion and more have yet to be fully reported.

Within two months last year, the Dell group alone moved the equivalent of €40 billion in intellectual property assets from Irish-registered subsidiaries domiciled in Bermuda to others fully resident here. On April 5, 2019, EMC Information Systems International, the business IT infrastructure supplier based in Ovens, Co Cork acquired IP from its parent for $7.5 billion.

Then on May 31, VMware International Ltd, the group’s cloud software arm, onshored its own slice of IP from its Bermuda-domiciled parent for $39.2 billion. In each case, the transaction was financed by intercompany loans.

Analog Devices, which employs over 1,200 people designing and manufacturing chips in Limerick and Cork for clients including Apple, provided a rare level of detail into the $20.7 billion worth of IP rights it moved to Ireland in 2018. “The ultimate parent company, Analog Devices Inc, conducted a review of its global business and pursuant to that review, decided to restructure its intellectual property portfolio,” Irish-based subsidiary Analog Devices International Unltd reported. “As a result, the company acquired certain licenses, technology, tradenames, customer lists, production contract, order backlog and other intellectual property rights which will be used for the purpose of, and for the benefit of the company’s trade.”

As part of this transaction, the Irish subsidiary paid its parent a total of $32.2 billion in cash, interest-bearing intercompany loans and shares. “The difference between the total consideration paid and the fair value of the identifiable assets capitalised represents a distribution of $11.5 billion,” the company reported.

While it has yet to file accounts for a full year with its new IP structure in place, Analog Devices International Unltd already saw its charge for amortisation of intangibles jump from $3.5 million in 2017 to $40.7 million in 2018.

Meanwhile, another Irish subsidiary of a US-based chip manufacturer, Microchip Technology Ireland Ltd, acquired the Microchip group’s intellectual property for a region it described as “rest of the world”. On March 28, 2018, the Irish company first paid $13.9 billion in notes and preference shares for the IP assets to Microchip Technology (Barbados) II Incorporated, then acquired the entire capital of the Barbados company for $3.25 billion in ordinary shares. 

The group also transferred ownership of Microchip Ireland Ltd from a holding company in Jersey to Microchip Technology Malta Ltd, whose name appeared in both the business registries of Ireland and Malta in March 2018. The group may have had plans at the time to take advantage of the so-called single Malt structure using the double taxation treaty between Ireland and Malta to replicate the double Irish scheme, however Minister for Finance Paschal Donohoe announced that the loophole was subsequently closed last year.

In January 2019, Microchip transferred another $1.9 billion worth of IP rights to its Irish subsidiary following the acquisition of its competitor Microsemi. 

More recently, database giant Oracle joined the trend with its Irish-based subsidiary Oracle EMEA Ltd. On April 5, 2019, the company acquired IP rights for €11.4 billion from Oracle Technology Company Unltd, which is registered in Ireland but tax resident in the Isle of Man and was until then the group’s IP licencing centre for Europe.

Two smaller, yet significant transactions complete the picture of recently reported tech intellectual property onshorings. 

Prior to its acquisition by Google last year, Fitbit Holdings Unltd, an Irish-registered company domiciled in Bermuda, sold intellectual property to its fully Irish subsidiary Fitbit International Ltd for $346 million in 2018. As previously reported, the decision may be at odds with that of its new owner as Google appears to be moving IP out of Ireland.

On January 31, 2018, the online collaboration platform Slack sold its Singapore subsidiary to its Irish one for $1. Included were $147.9 million worth of non-US intellectual property rights and related assets and liabilities, which became the property of Dublin-based Slack Technologies Ltd. 

More examples have yet to be reported. For example, SurveyMonkey has disclosed that it transferred its non-US intellectual property rights between two Irish-registered subsidiaries, Isle of Man-domiciled SurveyMonkey Global Holdings Unltd and Irish-domiciled SurveyMonkey Europe Unltd, for an amount yet to appear in published accounts. Meanwhile, Twitter was “considering” a transfer of intellectual property rights to its Dublin international HQ when it last prepared accounts last June.

Read more from the Mapping Multinationals series:

• From Menlo Park to Cayman: How Facebook’s Irish billions caught the eye of the US taxman
• Mapping multinationals: Trump’s tax law and tech’s €350bn dividend drive