To track the business of multinationals in Ireland, The Currency routinely downloads hundreds of pages of PDF documents. They are all generated with software made by Adobe, one of many income streams for the Silicon Valley multimedia design giant. And of $15.8 billion in global group revenue last year, new company documents show that nearly half – $7 billion – was booked by the Irish subsidiary Adobe Systems Software Ireland Ltd.

Located in Dublin’s Citywest campus, the company “is the intermediary holding company for Adobe subsidiary companies based in Europe, Middle East, Africa and the Asia Pacific regions (together “the Group”). The principal activities of the Group are the licensing, marketing, production and distribution of computer software and related products and services for markets outside the United States of America, Canada and Mexico,” according to its latest filing details which add that it also carries out research and development on behalf of its parent.

Last year, the Dublin-based company acquired $11 billion worth of intellectual property in a transaction detailed at the time. Adobe was one of the very last multinationals to decommission its so-called double Irish tax structure in 2020, ahead of a deadline by the end of that year. We can now see its replacement green jersey machine at work.

“Operating profit increased by 255%”

“During the period ended 3 December 2021, the Group continued to focus on delivering comprehensive technology platforms to its customers to drive revenue and earnings growth. Revenue increased by 25 per cent to $6,991,663,000 and operating profit increased by 255 per cent to $843,994,000 in the period due to the exploitation of intellectual property rights acquired in prior period,” Adobe Systems Software Ireland has just reported.

There has been a major change in the cost structure of the company. Under the double Irish scheme, it bought software from its parent, which used to hold intellectual property rights and generate resulting profits under Bermuda tax residency, paying no corporation tax until any gains were repatriated to the US. This cost was divided by four in Adobe Systems Software Ireland’s accounts last year to under $1 billion.

Instead, everything now happens in Ireland. Having acquired the corresponding intellectual property, the Dublin company now amortises its value against trading profit under the Irish tax code’s generous Capital Allowance for Intangible Asset. This deductible charge grew from virtual insignificance to $2.9 billion last year.

“The intellectual property (IP) asset has a definite useful life of 7.75 years and is amortised over this period using a method that reflects the pattern in which the Company expects to consume the IP’s economic benefits,” Adobe Systems Software Ireland. Reported. This indicates that deductions will continue until mid-2028, with annual amounts likely to decrease over time from the front-loaded $2.9 billion booked last year.

The number of employees at Adobe’s Irish office and its 27 marketing and R&D subsidiaries around the world increased to 3,602 last year and their payroll costs reached $929 million. After other administrative and distribution expenses, Adobe Systems Software Ireland recorded a pre-tax profit of €811 million.

Its corporation tax charge for the year was $165 million, of which $71 million was due overseas in withholding and foreign corporation taxes collected by market countries on its local subsidiaries, and $94 million was payable in Ireland. Despite the growth in revenue and profit, the total tax charges reported by Adobe Systems Software Ireland, its immediate Irish-registered parent Adobe Software Trading Company Ltd and their subsidiaries was around $20 million lower in 2021 than in the previous year.

Adobe Systems Software Ireland initially financed the 2020 acquisition of the IP with a matching $11 billion intercompany promissory note from Adobe Software Trading Company. Unlike other multinationals, this debt does not carry any interest, so it is not reported as revenue or a cost in either company’s accounts. However, Adobe Systems Software Ireland does use its cash flow to repay the principal amount.

Last year, its parent Adobe Software Trading Company received a $3.2 billion repayment of this debt. That company is now tax resident in Ireland, but the transfer appeared as an “unrealised gain” on the transaction conducted when it was still Bermuda-resident, and does not count towards its reported taxable profit. 

As a result, Adobe Software Trading Company ended the year with just $14.6 million in pre-tax profit and declared a $10.3 million tax charge, but paid a $3 billion dividend to the group’s head office in Silicon Valley. Given the similar amounts to those booked for amortisation, this financial flow now looks set to continue in parallel for the duration of the intellectual property’s life until 2028.

Further reading

Lobbying for the green jersey: How multinationals want to protect their Irish tax position