Newspaper article International New York Times

Spanish Company's Moves in Ireland Hit Political Buttons

Newspaper article International New York Times

Spanish Company's Moves in Ireland Hit Political Buttons

Article excerpt

Grifols, a global leader in blood-plasma products, said its move is not a case of tax engineering, but some find the timing suspicious.

One part of the move had been long in the works by Grifols, a big Spanish medical company. The other came as a politically perilous surprise.

When Grifols, a global leader in blood-plasma products, held a ribbon-cutting ceremony for its new $100 million distribution center outside Dublin last month, the event capped a long-planned project that would add 140 jobs to its work force in Ireland.

It was the other part of the festivities the same day that few people outside the company were expecting. Grifols, which has 14,000 employees -- more than half of them in the United States -- announced that it would move its corporate treasury from Barcelona to Dublin. From there, Grifols will manage all its global payments, including taxes.

The timing of Grifols's move raised eyebrows. About a week earlier, the Irish government had announced a new business-friendly corporate tax category, and European Union officials are taking a hard look at multinational companies' tax dealings with Ireland and some other countries.

Grifols insists that moving its treasury operations to Dublin is not a case of tax engineering but is meant to take advantage of a skilled Irish work force, the country's legal stability and its convenient geographic location between Continental Europe and the United States. It says the move will have no significant impact on the amount of taxes it will pay in the 30 countries where it does business.

But Grifols could emerge as an early explorer of Ireland's newly announced tax category -- a "knowledge box" that, if the Irish Parliament approves the plan, would grant a tax rate of 6.25 percent on revenue and royalties pegged to patents and other intellectual property.

That rate would be half the already business-friendly 12.5 percent corporate rate in Ireland; Spain's nominal corporate rate of 28 percent is scheduled to drop to 25 percent in January. (The corporate rate in the United States, before deductions, is 35 percent.)

The Grifols example might also provide a test for a new agreement on international guidelines spelled out by the Organization for Economic Cooperation and Development. The rules are meant to crack down on tax avoidance by multinational companies and ensure that they are aboveboard in how they account for their taxes around the world.

"It's not common to make such a big reorganization and for functions to get moved away from Spain, and all in the same month as BEPS," said Javier Vinuesa, a partner in the tax department of Gomez- Acebo & Pombo, a Spanish law firm. BEPS refers to "base erosion and profit shifting," which the O.E.C.D. guidelines are meant to stop.

"I don't see any other Spanish group doing this," Mr. …

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