An Irish-based pharmaceutical company has been issued with a €1.6bn tax bill by the Revenue Commissioners.

Perrigo is set to appeal the demand.

The bill relates to a dispute over the amount of tax paid on the sale by Elan - later bought by Perrigo - of its stake in drug Tysabri five years ago.

It is claimed Elan should have paid a tax rate of 33% on the sale, but it paid 12.5%.

In a filing with the US Securities and Exchange Commission, Perrigo says that the Revenue Commissioners decided Elan paid an incorrect tax rate on proceeds from the 2013 sale.

It says it will "timely file an appeal" regarding the Revenue Commissioner's assessment for the calendar year ended December 31st, 2013.

The tax bill is the second largest in the history of the State, and represents around 15% of the annual corporation tax take.

But no payment has to be made, if at all, until all proceedings have been completed - which Perrigo says could take a number of years.

The assessment relates to the tax treatment of the April 2013 sale by Elan of Tysabri's intellectual property to Biogen.

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Perrigo says: "The upfront payment received from Biogen Idec in 2013 and contingent payments received in subsequent years were recognized as trading income in Elan Pharma's tax returns filed with Irish Revenue.

"This treatment is consistent with Elan Pharma's activities for two decades relating to the active management of intellectual property rights, which includes acquiring, developing, holding, exploiting, dealing in and disposing of intellectual property rights for use in the pharmaceutical industry."

On October 30th, the Revenue Commissioners issued an audit findings letter to Elan, claiming that IP sales transactions - including the sale of Tysabri - were not part of the trade of Elan and therefore should have been treated as chargeable gains subject to an effective 33% tax rate, rather than the 12.5% rate applicable to trading income.

Perrigo says it "strongly disagrees" with both the basis on which Elan Pharma has been assessed and the methodology used to calculate the amount.

It adds that it believes the Revenue Commissioners position is "incorrect as a matter of law".

Perrigo's corporate headquarters is based at the Treasury Building in Dublin, and it also has operations in the US.

It acquired Elan through the December 2013 merger between Perrigo's predecessor and Elan Corporation.