Dijsselbloem told Dutch rail firm to stop using Irish subsidiary

A decision by the Netherlands state-owned national railway company, Nederlandse Spoorwegen (NS), to stop using its Irish subsidiary to avoid corporate taxes in its home nation came following an intervention by Jeroen Dijsselbloem, the Dutch finance minister and president of his Eurogroup of peers.

Mr Dijsselbloem last week told the Dutch parliament NS will “phase out” its use of Dublin company NS Financial Services Company (NSFSC), which has helped NS avoid more than €270 million in taxes in the Netherlands.

The Irish subsidiary has been used by NS to order new trains since 1998, which it then leases to its parent company. The profits of NSFSC – €114 million in 2013 on sales of €217 million – are then taxable at Ireland’s lower rate.

Dilemma

NS noted in its 2014 annual report that the arrangement, which is controversial in political circles in the Netherlands, was posing a “dilemma” for the railway company.

Mr Dijsselbloem said new trains will no longer be ordered through NSFSC and will be bought using a Dutch-registered subsidiaries. This includes the estimated €1 billion cost of about 80 new intercity trains planned for coming years, while a recent €300 million order of Sprinter commuter trains from Stadler, in Switzerland, was transacted through the Netherlands.

The ownership of trains bought through NSFSC currently in use will be shifted to the Netherlands incrementally over the next 10 years.

Profits

NSFSC is based in Behan House, Mount Street, in Dublin. The company had accumulated profits of more than €785 million by the end of 2013, according to its accounts. It owned trains with a net value of €1.3 billion at that date and had commitments to buy a further €1.3 billion. It reduced its Irish tax bill to €5.4 million in 2013 with the aid of €5.8 million in capital allowances.

The accounts for the Irish unit also outline the results of a legal battle with AnsaldoBreda, an Italian manufacturer from which it ordered 16 trains, nine of which had been delivered. NS took the trains out of service due to concerns about their performance in winter weather, and cancelled the remaining order, sparking a legal row. In a settlement reached last March, the trains were returned to AnsaldoBreda, which agreed to pay NSFSC €125 million, plus a further €21 million payable if it sells them on.