Non-resident firms maintain links with State despite changes in legislation

 

Some owners of former Irish registered non-resident (IRNR) companies are maintaining their links with this jurisdiction, despite changes to the law that targeted such companies.

A Dublin company formations executive, Mr Sean Kavanagh, said a number of such owners are deciding to remain involved with the Republic because of its low corporation tax rate.

An Israeli accountant and director of a number of controversial IRNRs has said he is seeking to have two IRNRs returned to the register of companies. Getting Irish-resident directors for his companies is not a problem, he said.

Mr Shmuel Gurfinkel is a director of a number of Irish companies owned by Mr Boris Birshtein, a millionaire businessman. The two companies he is seeking to have returned to the Irish register own a hotel and a bank in Chisinau, the capital of Moldova.

Mr Gurfinkel said there are "always reasons of convenience for being registered here or there. It's not done just like that."

He would not say what particular reasons were behind seeking to maintain these companies in the Republic, but did say it could be about saving income tax and "that is not a crime".

Mr Gurfinkel also said a lot of companies in international business had Irish companies and were paying tax in the Republic and enjoying the low corporation tax rate.

"We don't think we will use [Irish registered companies] less in the future. To name an Irish director is not such a problem", he said, referring to a new obligation on companies to have at least one Irish director. "I don't see any problem for the future."

The two companies Mr Gurfinkel is seeking to have returned to the register are Sturge Ltd and Maximilia Ltd. Mr Birshtein, who owns the companies, is a native of Lithuania and a Canadian citizen.

Mr Birshtein has been linked to the Russian mafia. Seabeco, a Canadian company with which he was associated, was wound up in 1993 amid accusations of fraud and money laundering. However, Mr Birshtein was cleared of any personal wrongdoing.

"Mr Birshtein is totally clean," Mr Gurfinkel said. "It was nothing but rumours. If something was wrong, would they let him be a Canadian citizen?"

Mr Birshtein's partner in Seabeco, Dmitri Yakubovski, left Canada in 1992 after being wounded in a gun battle near his Montreal home. Four years later, he was convicted in Russia of the theft of $550 million (€520 million) worth of rare manuscripts and icons from the Russian National Library, which were on their way to Israel.

Yakubovski was a director of three IRNRs. They were formed in 1992 and dissolved in 1995, most likely for failure to file returns. Mr Birshtein's company, Maximilia, was incorporated in 1991 and dissolved in August 2000, seemingly for failure to file returns. Sturge was incorporated in 1991 and dissolved in 1999. Mr Birshtein's companies filed accounts in the mid-1990s that showed they made profits of tens of millions of dollars. Their business was described as consultancy. Mr Gurfinkel said the "consultancy activity" was a temporary one and the companies are now holding companies. He said the consultancy work was conducted around the world, but would not say who was directly involved.

Mr Birshtein was involved in the late 1980s and early 1990s in assisting Western companies to make high-level contacts with figures in Russia and the former Soviet Union.

According to the Financial Times, Mr Birshtein hosted a meeting in Israel in 1995 at which top members of the Russian mafia discussed the division of areas of influence in the former Soviet Union.

Mr Birshtein's involvement with Irish companies is the latest of a series of connections to be reported between the Republic and controversial dealings involving Russian and Eastern European interests.

In many cases, the involvement is historical but in others, such as that of Mr Birshtein, the link with the Republic is ongoing. Mr Birshtein is the owner of at least one company, Magnum Associates, which is still on the Irish register.

According to Mr Kavanagh, who is a director of Dublin-based Company Formations International, IRNR business "disappeared" after the introduction of changes to tax legislation and company law in 1999 and 2000.

"It used to be 20 per cent of our turnover. Now most of our involvement is in mopping up since the introduction of the changes."

However, he says some foreign owners are maintaining an interest here.

Some are saying, "we had a good run for our money, we were tax free for 10 years, we got on well with the Irish and their corporate tax rates are coming down," and they've decided to stay, he adds.

He also says that, although it is rare, some people are establishing new IRNRs here, which comply with the regulation that they must have related companies with substantial business within the jurisdiction. In such cases, the beneficial owners of the IRNR have to be disclosed to the Revenue Commissioners.

The changes introduced in 1999 made all companies tax resident here. He said his company is sometimes contacted by the Revenue or authorities acting on its behalf, seeking to raise taxes from former IRNRs.

"Typically, we say the shareholders are not here or the directors. We know little about this company and they don't have any assets in this State, and by and large they go away," he added.

The changes introduced to combat IRNR companies were brought in so quickly that some people found they could not transfer assets owned by the IRNR companies to other jurisdictions prior to the implementation of the new regulations. These companies are now subject to Irish tax law.