Company sends €100m to US parent

SOFTWARE COMPANY Synopsis Ireland Ltd paid a €100 million dividend to its US parent in November 2010, according to accounts filed recently.

The company has its registered office in Blanchardstown Corporate Park, Dublin, but operates from a business address in Hamilton, Bermuda, according to the accounts.

It and its subsidiaries made a pretax profit for the year to the end of October 2010 of $83.8 million (€62.3 million), a significant drop over the previous year when the profit was $152.3 million.

Filings in the Securities and Exchange Commission in the US by the group’s ultimate parent, Synopsys Inc, show it received substantial corporation tax rebates because of favourable rulings by the US Internal Revenue Service (IRS).

The Irish company and its subsidiaries are involved in the research, development and distribution of software and the provision of consulting services in Europe, the Middle East, Asia and Japan.

The Irish holding company has branches in Hong Kong, China, Malaysia, Taiwan and Russia. Its parent in turn is US-based Synopsis Inc.

The accounts do not give a figure for turnover. Synopsis Ireland and its subsidiaries employed an average of 1,890 people during the year, at a cost of $173.5 million.

The accounts say that Irish corporation tax of $2.6 million was paid, compared with $2.8 million the previous year. Overseas corporation tax of $5 million was paid.

The accounts give a pretax profit figure for the company ($104 million) which is the same as the profit after tax, indicating that it paid no tax.

In 2008 Synopsis Inc successfully appealed appealed a bill for more than $477 million (€357 million) from the IRS that it issued after a review of transfer pricing arrangements with its Irish subsidiary.

The successful appeal by Synopsys, a world leader in software for semiconductor design and manufacturing, was seen as a boost to the Republic’s strategy of using tax incentives to attract foreign direct investment.

The latest quarterly filing by Synopsys Inc to the Securities and Exchange Commission in the US says the firm had an effective tax rate of just 6.9 per cent in the three months to the end of July, 2011. This compared with an effective rate of 17.6 per cent in the same period in 2011.

“The Company’s effective tax rate for the three months ended July 31, 2011 is substantially lower than the statutory federal income tax rate of 35 per cent primarily due to lower tax rates applicable to its non-US operations partially offset by state taxes and non-deductible stock compensation,” the company noted in its filing.

In the nine months to the end of July the firm had a negative effective tax rate (ie a rebate) of 9.6 per cent. The previous year the equivalent figure was 33.2 per cent. The company got a $52.7 million rebate that year.

The effective tax rates for the nine months ended July 31st, 2011, and 2010 were negative primarily due to the tax impact of favourable IRS settlements, the filing said.

“The company files income tax returns in the US and various state and local jurisdictions. Its subsidiaries file tax returns in various foreign jurisdictions, including Ireland, Hungary, Taiwan and Japan.

“The company remains subject to income tax examinations in the US for fiscal years after 2009. In Ireland, Hungary, Taiwan and Japan, the Company’s subsidiaries remain subject to tax examinations for fiscal years after 2005.”