Wednesday, February 24, 2010
AstraZeneca has announced that the company has settled a long-running transfer pricing issue with HM Revenue & Customs (HMRC) in the UK.
Under the agreement, AstraZeneca will pay GBP505m (780m) to HMRC to resolve all claims made by the tax authority in relation to this issue for the 15-year period from 1996 to the end of 2010. The payment will be made by a first instalment of GBP350m in March 2010, and a second final instalment of GBP155m in March 2011.
As a result of this agreement, the joint referral of this issue to the UK Tax Court by AstraZeneca and HMRC, as disclosed in the 2008 AstraZeneca Annual Report, will be withdrawn. The settlement also resolves certain other outstanding UK tax matters.
AstraZeneca states that it has provided in its accounts for the outcome of this issue, which the company describes as "complex transfer price considerations that have taken many years to resolve."
Although the exact details of the case are unclear, the dispute is thought to have centred on the portion of the firm's intellectual property portfolio held in Puerto Rico, which allowed the firm to benefit from the lower tax regime in place there with regard to royalty payments on various products.
As a consequence of the settlement of this issue and other tax matters, AstraZeneca will release part of its provision to earnings. Accordingly, The group tax rate for 2010 will be approximately two percentage points lower than previously stated by AstraZeneca.