| Item 8.01. | Other Information. |
Perrigo Pharma International, a designated activity company organized under the laws of Ireland, formerly known as Elan Pharma International Limited (“Elan Pharma”) and currently a subsidiary of Perrigo Company plc (“Perrigo” or the “Company”), will timely file an appeal with the Irish Tax Appeals Commission regarding a Notice of Amended Assessment (“NoA”) issued by the Irish Office of the Revenue Commissioners (“Irish Revenue”) for the calendar year ended December 31, 2013.
The NoA is dated November 29, 2018, and assesses an Irish corporation tax liability against Elan Pharma in the amount of €1,636 million, not including interest or any applicable penalties. Perrigo strongly disagrees with this assessment and believes that the NoA is without merit and incorrect as a matter of law. In addition, no payment of any amount related to this assessment is required to be made, if at all, until all applicable proceedings have been completed, which could take a number of years.
Perrigo acquired Elan Pharma through the December 2013 business combination between Perrigo’s predecessor and Elan Corporation, plc. The NoA relates to the tax treatment of the April 2013 sale by Elan Pharma of Tysabri® intellectual property and related assets to Biogen Idec. As previously reported, the consideration paid by Biogen Idec took the form of an upfront payment and future contingent payments. The upfront payment received from Biogen Idec in 2013 and contingent payments received in subsequent years were recognized as trading income in Elan Pharma’s tax returns filed with Irish Revenue. This treatment is consistent with Elan Pharma’s activities for two decades relating to the active management of intellectual property rights, which includes acquiring, developing, holding, exploiting, dealing in and disposing of intellectual property rights for use in the pharmaceutical industry.
On October 30, 2018, two months before the expiry of the applicable five year statutory limitation period, Irish Revenue issued an audit findings letter to Elan Pharma asserting the claim (a) that IP sales transactions by Elan Pharma, including the sale of Tysabri®, were not part of the trade of Elan Pharma and therefore should have been treated as chargeable gains subject to an effective 33% tax rate, rather than the 12.5% tax rate applicable to trading income, and (b) that all amounts received in respect of both the Tysabri® transaction and the related transaction entered into with RPI Finance Trust in 2017 should be taxed in Elan Pharma’s 2013 tax year.
The audit findings letter expressly invited Elan Pharma to bring any areas of disagreement to Irish Revenue’s attention. Elan Pharma promptly met with Irish Revenue and made two written submissions. However, less than a month later—at a time when Perrigo believed that discussions concerning the matter were ongoing—Irish Revenue issued the NoA. Perrigo then asked Irish Revenue to clarify the basis of their assessment and provided Irish Revenue with additional documentary support and analysis. Irish Revenue recently communicated to Perrigo that no further information would be provided to clarify the basis of its assessment and that, as a matter of procedure, Perrigo was to move forward with filing its appeal. The deadline for filing an appeal is December 28, 2018.
Perrigo strongly disagrees with both the basis on which Elan Pharma has been assessed and the methodology used to calculate the amount set out in the NoA. Perrigo firmly believes that the NoA is without merit and that Irish Revenue’s position is incorrect as a matter of law. Perrigo also believes that, based on applicable case law, Irish Revenue’s published guidance on what constitutes a trade for Irish tax purposes, and related published precedents, Elan Pharma’s tax returns were filed correctly. For approximately 20 years, Elan Pharma has consistently filed its Irish corporation tax returns on the basis that it was carrying on a trade of acquiring, developing, holding, exploiting, dealing in and disposing of intellectual property rights and licenses for use in the pharmaceutical industry. Perrigo can point to numerous examples of prior disposals of such rights where such treatment for tax purposes has not been disputed by Irish Revenue. Accordingly, Perrigo will timely appeal the NoA and will pursue all available administrative and judicial avenues as may be necessary or appropriate.
