Building supplies producer James Hardie Industries has confirmed that it’s moving its domicile from The Netherlands to Ireland for taxation reasons.
The news, revealed in a series of statements and briefings yesterday in Sydney, confirms a report earlier this month in the Sydney Morning Herald.
Hardie said the move should improve its chances of qualifying for tax benefits in the United States, which it had failed to achieve through its earlier move to The Netherlands.
That move, earlier this decade, was calamitous, resulting in the worst publicity ever for a major Australian corporate as inquiries and court cases revealed it had been done to avoid its asbestos responsibilities in Australia.
Then directors suffered the ignominy of being forced to appear before inquiries and in court where ASIC won a landmark case against several of them, led by former chairman, Meredith Hellicar.
This time round the company has made sure that its asbestos liabilities are to the forefront: they were mentioned extensively in statements and briefings, the company made clear the various governments had been consulted on the move, as had the Tax Office, and full disclosure would be made to meetings of shareholders.
Hardie said the move would not affect its commitment to contribute to the asbestos diseases fund, but the costs of the move would be likely to reduce its liability to the fund in fiscal 2011.
The company said it had agreed with the NSW government that it would apply to the Australian Taxation Office for new tax rulings covering its asbestos diseases contributions, seeking confirmation that its tax status will not change materially as a result of the moves.
It said it would seek shareholder approval for the move to Ireland and the change to an SE corporate form at an extraordinary general meeting in Europe on August 21, the same day as the company’s annual general meeting.
"Because of the proposed change in the company’s domicile, James Hardie also believes it is efficient to transfer its intellectual property and treasury and finance operations from The Netherlands before the expiry on 31 December 2010 of the favourable tax concessions the company currently enjoys in The Netherlands under the Financial Risk Reserve regime," the company said in the statement to the ASX
Chairman Michael Hammes said "the Board believes that the Proposal and the transfer of the intellectual property, treasury and finance operations to Ireland (together referred to as the Transaction) is the best course of action at this time and is in the best interests of James Hardie and its shareholders."
Sydney meetings will be held on August 18.
Hardie said the moves would cost it an estimated $US51 million – $US71 million, of which $US14 million had already had been spent: about $US30 million to $US50 million related to Dutch taxes as a result of a capital gain on the transfer of intellectual property from The Netherlands.
Mr Hammes said in a statement that, while the costs of the transfers were "significant”, directors believed the proposal "is the best course of action at this time for the company and its shareholders”.
He said directors recommended the proposals unanimously and would vote their own shares in favour.
Mr Hammes said the transfer to Ireland would improve the company’s chances of qualifying for tax benefits under a tax treaty between the US and Ireland, because the Irish treaty did not contain a "substantial presence test” requiring senior managers to spend substantial time in the host country.
It made James Hardie’s intellectual property and treasury and finance operations eligible for a statutory tax rate lower than in The Netherlands, and most shareholders would be eligible to receive dividends not subject to withholding tax.
The lower tax would improve the company’s cash flow and the contributions to the asbestos fund.
Hardie shares traded up two cents at $4.17 yesterday.
At the moment the company’s shares are under pressure from the continuing deep slump in US housing.
