Microsoft has taken steps to shield from the public the affairs of two Irish-registered subsidiaries that help it cut its US tax bill by hundreds of million of dollars, writes Arthur Beesley, Senior Business Correspondent

The software giant applied to the Companies Office on Monday to re-register its Round Island One and Flat Island Company subsidiaries as companies with unlimited liability. Such companies have no obligation to file their accounts publicly.

The move to change the legal status of the subsidiaries comes only weeks after the US treasury department said it was developing new rules to stop US groups transferring intellectual property and patents abroad as a way of minimising their exposure to US tax.

That development was widely seen as a response to political disquiet in the US about the tax strategies of multinational companies on foot of a Wall Street Journal report on Microsoft which said that the Irish-registered Round Island One Ltd was the vehicle it used to cut its annual tax bill by $500 million (€419.25 million).

Round Island One, which carries out research and development and controls more than $16 billion of Microsoft assets, made a profit of €3.52 billion in the year to June 2004 and paid $308 million in Irish corporation tax.

Flat Island Company was later shown to make a profit of $802.4 million in 2004 on sales of $2 billion, but to have paid no tax. It issues licences for software in Europe, the Middle East and Africa.

Microsoft did not explain why it chose to re-register the two subsidiaries when questioned about the move. "As part of our strategy to facilitate and support future business growth, Microsoft is re-organising some of its legal entities within the group," it said in a statement. "Microsoft Ireland Operations Limited (MIOL) is the primary operating legal entity in Ireland, employing over 1,200 people in four operations based in Sandyford. MIOL remains unaffected by any changes and will continue to publicly file its financial statements."

A number of Irish-owned companies have taken out unlimited liability status in recent times, including Barry's Tea in Cork, construction firm Bovale Developments, the Tedcastle oil group, Cork industrial holdings company Punch, Kilsaran Concrete and fishing company Atlantic Dawn.