U.S. Chip Maker Analog Devices Faces Multi-Millon Dollar Tax Fight With Ireland

(Bloomberg) -- Analog Devices Inc. is battling a tax demand from Irish authorities, in a case that the U.S. chip maker says could materially hurt its earnings.

Irish officials told the company, an Apple Inc. supplier, that its Irish tax resident unit owed about 43 million euros ($49 million) relating to inter-company transfers stretching back to 2013, Analog said in filings last month. This assessment excludes any penalties and interest, it said. The company’s shares dropped as much as 3.4 percent on Wednesday.

Norwood, Massachusetts-based Analog said it will “vigorously defend” its position and is appealing the decision. It warned that if it were to lose the case, “such assessment and any potential impact related to years subsequent to 2013 could have a material unfavorable impact.”

Ireland’s tax authority said it would not comment on individual cases. An Analog spokeswoman confirmed the case is ongoing, and said the company wouldn’t comment beyond that. Analog is taking the case to the Irish Tax Appeals Commission.

International tax authorities are keen to limit transactions among corporate subsidiaries, which are sometimes seen as ways to shift income to low-tax jurisdictions. The Irish corporate tax rate is 12.5 percent, while in the U.S. President Donald Trump’s administration has cut the federal rate to 21 percent.

Established in Ireland in 1977, Analog employs about 1,200 people at its original and main hub in Limerick in the south-west of the country, in addition to its design facility in Cork, the second-biggest city in Ireland. Cork is also a base for the Irish operation of Apple, which is fighting a European Commission order to pay 13 billion euros in tax arrears to Ireland.

Analog specializes in data converters and chips that translate real world things -- such as a button press or sound -- into electronic signals. Last month, it said its effective tax rate was below its blended U.S. federal statutory rate of 23.4 percent.

“This is primarily due to lower statutory tax rates applicable to our operations in the foreign jurisdictions in which we earn income,” it said.

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