Microsoft subsidiary has €477m pretax profit

 

MICROSOFT’S IRISH subsidiary, which is responsible for the software company’s distribution and logistics in Europe, the Middle East and Africa, generated a pretax profit of €477 million in the 12 months to the end of June 2008.

Microsoft Ireland Operations Ltd (MIOL) had turnover of €11.3 billion and paid corporation tax of €63.5 million according to accounts just lodged with the Companies Office and seen by The Irish Times.

The figures are down significantly on 2007 due to a reorganisation of the Irish operations. In 2007, MIOL generated just over 10 per cent of its parent corporations overall $20.1 billion pretax profit. Since then Microsoft has significantly reorganised its Irish operations which saw more of the business being transferred to Microsoft Ireland Research (MIR), an unlimited company which is not required to file accounts.

MIOL’s ultimate parent, Microsoft Corporation, reported a pre- tax profit of $23.8 billion on revenues of $60.4 billion in 2008.

The accounts state localisation and research and development functions along with the associated intellectual property and employees transferred to MIR.

Staff numbers at MIOL fell from an average of 1,155 in 2007 to 818 during 2008. Staff wages and salaries for the year were €71.4 million, down from €112.3 million.

MIOL’s administrative expenses increased by almost €3 billion to €10 billion. A significant portion of this is accounted for by royalty payments to MIR associated with the products it shipped.

MIR is an unlimited company and as such does not have to file its accounts with the Companies Office. The Irish Times understands however that MIR paid Irish corporation tax of €108.2 million for its 2008 financial year.

The combined take for the Irish exchequer of €174 million would have been higher but for the impact of demands from the US Internal Revenue Service (IRS) relating to transfer pricing. It was recently reported that that the Revenue Commissioner’s take from corporation tax was reduced by €225 million last year because the IRS claimed additional taxes on transactions between US firms and their Irish subsidiaries.

No dividend was paid by MIOL during 2008 with the after tax profit of €413 million credited to the companies profit and loss account.

It paid a €1.4 billion dividend in 2007 and notes to the accounts say it has paid a dividend of €1,646.12 per share to its parent since year end. This equates to €551 million.

As well as supporting Microsoft’s operations in 126 countries, MIOL is responsible for selling Microsoft products in the Irish market.

The accounts show that Microsoft had sales of €88.3 million in Ireland during its 2008 financial year. Microsoft employs about 1,700 people directly and indirectly in Ireland.