From an unassuming building at the Parkmore East business park in Ballybrit, Co Galway, and an even less remarkable suburban office suite in Malta, the rapid testing division of the US-listed pharmaceutical giant Abbott Laboratories grew the profits it squeezes through the double malt tax loophole to nearly €1 billion last year.

Thanks to the corporate structure detailed by The Currency earlier this year, the business that emerged from Abbott’s acquisition of Alere five years ago and benefited from the booming demand for Covid-19 antigen tests during the pandemic reduced the effective tax rate on the rising profits from this trade to just 3.4 per cent, analysis of new company documents reveals.

Here is how.


Abbott Rapid DX International Ltd, the Ballybrit company acting as the division’s “international business service centre” and booking “the sale of medical diagnostic products to both third parties and other Abbott group companies”, more than doubled its revenue to €2.2 billion in 2021.

The Irish office increased its workforce by 75 employees to 315 last year as it took part in the expansion of the wider Abbott group during the pandemic. “While the increase in Abbott’s 2020 and 2021 global sales were mostly attributable to the Covid-19 pandemic, the increase in total sales over the last four years also reflects volume growth due to the introduction of new products across various businesses as well as higher sales of various existing products,” the directors of Abbott Rapid DX International commented in their annual report.

The Irish company not only grew the volume of sales booked in Ireland, it also took part in the transfer of several European and Canadian subsidiaries as part of group reorganisations, which generated a €103 million boost to its pre-tax profit. 

This, however, was a once-off effect. The Ballybrit international business service centre is not destined to return any significant profits under the structure, called the double Malt by The Currency in earlier reporting because it reproduces the outlawed double Irish tax scheme thanks to a loophole in the tax treated between Ireland and Malta. The trading profit taxable in Ireland last year came to just €31.5 million, resulting in a €5 million tax charge here.

Instead, most of the Irish company’s revenue was absorbed by over €2 billion in cost of sales last year. Although it did not detail where this money went, much of it surfaced in the accounts of its parent Abbott Rapid Diagnostics International Unltd.

 “The company is engaged in the sale of medical diagnostic products to other Abbott group companies,” the directors of Abbott Rapid Diagnostics International explained. “The company is the principal operating company for the Infections Disease Emerging Markets (IDEM) business unit and for the Afinion product line of the Abbott Rapid Diagnostics Division of Abbott group companies, consolidating business operations, ownership of the intellectual property (IP) and supply chain flows”. Afinion is a high-tech range of automated blood testing machines.

Abbott Rapid Diagnostics International has just one employee and, although incorporated in Ireland, it is tax-resident in Malta. It generated €1.4 billion in intercompany product sales and another €104 million in revenue from “the transfer of commercial returns from fellow group undertakings that arise in respect of sales made by those group undertakings of products in which the company holds contractual interests” – in other words, commissions on the sales of its subsidiaries.

Unlike its subsidiary in Ballybrit, Abbott Rapid Diagnostics International has very low costs, the largest of which was €366.6 million in “intercompany product purchases” – that’s the cost of having testing products manufactured by other group companies around the world. This left it with an €894.6 million operating profit last year, attached to the intellectual property owned by the company, which gives the products their real value.

This figure was twice as high as the previous year’s. “Turnover and operating profit increased during the year primarily due to increased sales of Covid testing products,” the directors of Abbott Rapid Diagnostics International reported.

Abbott Rapid Diagnostics International and several other Malta-resident companies in its holding structure are part of a foreign-owned “fiscal unit”, which makes them eligible to an upfront 5 per cent corporation tax rate in the Mediterranean island. 

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The ultra-low tax rate corresponded to a €55.6 million charge last year, but Abbott Rapid Diagnostics International enjoyed further reductions. The largest arose from a discrepancy between the price paid by the company for its IP and the subsequent valuation of the corresponding asset, which under Maltese tax rules generates a “difference in cost of intangible asset for accounting and tax purposes”. This cut the company’s tax bill by another €18 million.

After further adjustments, the company ended the year with a €33.5 million tax bill, of which €11.4 million was deferred and just €22.1 million due immediately.

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To complete the picture, a small part of Abbott Rapid Diagnostics International’s revenue went to another Irish-registered, Malta-resident company called Abbott Rapid Diagnostics International Subsidiary Unltd, which holds a fraction of the division’s IP. Its €24.9 million royalty income almost entirely translated into €21.6 million in pre-tax profit, but the combined effects of group relief with other Abbot subsidiaries and tax liabilities deferred from previous years left it with a tax bill of just €1 million.

This marked the end of the road for the conversion of the €2.2 billion in revenue booked in Ballybrit to taxable profit. Across Ireland and Malta, the three companies in Abbott’s double malt structure posted just under €947.7 million in combined trading profits, and declared €38.5 million in current tax charges for last year. This works out at a 4 per cent tax rate.

Taking into account once-off capital transactions arising from the transfer of subsidiaries, as well as adjustments for deferred tax credits and liabilities carried over from previous years, they had combined pre-tax profits of €1.3 billion and total tax charges for last year of €32.1 million, corresponding to a tax rate of 2.5 per cent.

The resulting net profits are cleared for distribution as dividends. While this did not happen in 2020, the first full year of the double malt’s operation with substantial profits from Covid-19-related business, Abbott has caught up in the past two years. In 2021, Abbott Rapid Diagnostics International paid €800 million in cash dividends to its immediate parent in Bermuda. Then, since the start of this year, it paid another €300 million and proposed an additional €450 million dividend that had yet to be paid at the time directors signed off on the accounts on November 25.

Once this happens, the total €1.6 billion in dividends paid will amount to the entire profits accumulated through the group’s double malt structure to date, net of the 4 per cent tax paid on them.

“The structure is alive and well”

The charity Christian Aid initially detected the Malta tax loophole. “It’s been six years since Christian Aid first highlighted this kind of Irish-Maltese tax avoidance structure,” the organisation’s head of advocacy and policy Conor O’Neill told The Currency. The Irish Government promised to address it, but what has actually happened in the years since? The structure is alive and well, its use is growing, and companies are still achieving effective tax rates as low as 4 per cent. It is unjust and unsustainable.”

Asked about Abbott’s tax arrangements by several TDs last year, Minister for Finance Paschal Donohoe said changes to the tax treaty with Malta had successfully eliminated a loophole previously highlighted by Christian Aid where some profits were not liable for any corporation tax. “As regards those arrangements or any other aggressive tax planning, I have repeatedly stated that I will not hesitate to propose legislation to address tax avoidance, where it may not be possible to address arrangements within the existing code.”

O’Neill referred to those comments and said: “Dáil statements from Finance Minister Paschal Donohoe make clear that this is not a mistake or an accident, but that the tax agreement underpinning this structure is operating as intended. The OECD has to prove that their latest highly complex international tax reforms, if actually delivered, will ensure that companies like Abbott pay at least 15 per cent on these profits, regardless of where they’re booked in the structure. But we strongly support proposals for UN negotiated tax rules that would give developing countries a greater say.”

A majority of the world’s nations adopted a resolution sponsored by developing countries at a UN General Assembly committee on November 23, urging discussions towards a potential global tax cooperation treaty that would go beyond the existing OECD process.

“That aspect of the debate is why we focus on tax avoidance and is too often ignored in Ireland, ”O’Neill said. “If we are enabling some of the biggest companies in the world legally avoid paying millions of dollars in tax, then who is losing out? Our experience is that structures like these siphon revenue not just from bigger EU states, but from some of the poorest countries in the world – undermining public budgets badly needed to pay for hospitals and schools. For a country like Ireland, with our record of internationalism and human rights, it’s a serious blind spot. These latest figures for this ballooning tax shelter show we’re still not willing to reckon with it fully.”

“We comply with all applicable local and international tax laws and regulations, including in Ireland and Malta.”

Abbott spokesperson

Asked by The Currency earlier this year about Abbot’s double malt structure, a company spokesperson said: “Abbott is a responsible and transparent tax payer, paying all of its taxes owed in every country in which it operates around the world. We comply with all applicable local and international tax laws and regulations, including in Ireland and Malta.”

There is every indication that the pharma multinational intends to continue exploiting the tax loophole between the two countries as long as it remains open. In Ballybrit, the directors of Abbott Rapid DX International wrote in their annual filing last month: “The directors plan to continue to expand the international business service centre. In addition, new products have been launched in 2021 and further launches are expected in future years.”

Further reading

How Microchip, Tencent and Lufthansa cut their tax bills via Ireland and Malta