ASTRAZENECA, THE Anglo-Swedish pharmaceuticals group, has agreed to pay the US Internal Revenue Service $1.1 billion to settle two long-running disputes, clearing the way to greater predictability in its tax planning on both sides of the Atlantic.

The company said the deal would allow it to release provisions of $500 million this quarter and cut its effective tax rate for 2011 from 27 per cent to 21 per cent.

It would also increase its target for core earnings per share from $6.45-$6.75 to $6.90-$7.20 per share.

It expects ultimately to reduce its current $2.3 billion tax provision to about $700 million.

The move follows the settlement of several transfer pricing disputes by multinationals, including GlaxoSmithKline.

It will strengthen AstraZeneca’s hopes of locating more intellectual property in Britain, in line with fresh government incentives which allow for lower tax on drugs patented in the UK.

Under the deal, AstraZeneca has reached a pricing agreement for the period 2002-24 with US and UK tax authorities, covering arrangements for transfer pricing, or allocating costs, revenues and taxable income between the two countries.

Alongside the $1.1 billion payment to the US, the resolution of the dispute will result in an undisclosed reimbursement to AstraZeneca from HM Revenue Customs in the UK.

The company has also settled a claim with the Internal Revenue Service running since 2000. – Copyright The Financial Times Limited 2011