Ireland is an attractive location in which to develop and exploit Intellectual Property (“IP”). Ireland’s tax regime is one of the most favourable and competitive in the world with regard to investment in research and development activities and the development, commercialisation and protection of the IP that comes from that investment. Ireland offers a low rate of corporation tax at 12.5% and also provides a range of tax incentives and reliefs for companies looking to develop and exploit IP.
IP rights and exploitation are considered valuable assets to Irish companies. Types of IP rights include patents, trademarks, copyright, design and recognised trade secrets. They may be sold, licensed, assigned and bequeathed. Irish tax legislation provides for a number of attractive reliefs in the form of capital allowances against trading income, research and development credits as well as a more favourable rate of Corporation Tax.
In order to qualify, companies must be carrying on a trade in Ireland and have sufficient employees with the appropriate expertise and skills required to carry out the functions of the trade.
Patent royalties paid by resident companies to non-resident companies are subject to withholding tax at the 20% standard rate of income tax. Ireland’s wide treaty network can usually eliminate or reduce foreign withholding taxes on inbound royalties from treaty countries. Where foreign tax is withheld in respect of royalties paid by a foreign company to an Irish resident trading company, a tax credit may be claimed against the Irish tax payable.
In certain circumstances a full exemption may be available on royalty payments. One of our tax team will be able to guide you on claiming such an exemption.
The R&D tax credit is a valuable tax-based incentive designed to encourage investment in research and development by companies in Ireland. Since its introduction the R&D tax credit scheme has evolved to offer increased tax credit benefits to companies across Ireland, most notably the opportunity to avail of valuable cash refunds.
A 25% credit is available in addition to the ordinary corporation tax deduction at the standard rate of 12.5%. Furthermore, for loss making companies the tax credit will be refunded to the company in three instalments over a period of 33 months from the end of the period in which the expenditure was incurred. This makes the R&D credit extremely valuable for both profit and loss making companies.
Any company can qualify for a R&D claim if they are involved in any of the following;
Developing new or |
Investing in technology, including the development of new or improved software |
The industries where R&D activities are most likely to incur are:
The Knowledge Development Box (KDB) was introduced in Finance Act 2015 and applies in respect of accounting periods commencing on or after 1 January 2016. The regime is ideally suited to SMEs deriving income from technology developed in Ireland. The introduction of this tax regime aims to reward those companies who invest time and effort into legally protecting their intellectual property
The KDB applies a preferential rate of corporation tax of 6.25% to profits from qualifying assets earned by Irish companies on a specified trade.
The amount of profits that can avail of the regime will be the proportion the profits of a specified trade bear to the total cost incurred to develop the qualifying assets.
If the answer is ‘’yes’’ to any of the following questions, then it may be possible to take advantage of the Knowledge Development Box regime:
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