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.
Tax reliefs available:
- Research & Development (R&D) Credit – R&D tax credits of 25% are available for qualifying R&D expenditure. Visit our Overview of the R&D Tax Credit Regime section for further information
- Knowledge Development Box (KDB) – KDB provides for an effective 6.25% corporation tax rate. Further details can be found on our Overview of the KDB Tax Regime section
- Capital Allowances – The allowances are based on the amount charged to a company’s accounts for the accounting period in respect of the amortisation of the relevant intangible asset. Alternatively, a company can opt for a fixed write-down period of 15 years at an annual rate of 7% of qualifying expenditure, and 2% in the final year. Intangible assets include the following:
- any patents, registered design, design right or invention
- any trade mark, trade name, brand, brand name
- computer software or a right to use or otherwise deal with computer software;
- any rights derived from research into the effects of a medicine or a product of any design, formula, process or invention
- Withholding Tax (“WHT”) – WHT applies to royalty payments by Irish companies to non-residents. A reduced treaty rate may be applied at source if the appropriate residence certificate has been presented to the withholding agent making the payment. The chart located on the Revenue website contains the WHT rates applicable
Credit for Withholding Tax on Royalties
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.
- Interest – Interest paid on loans to acquire IP is allowable as a deduction. Any interest deductions are ring-fenced and only available against income from the relevant trade. Unused interest deductions may be carried forward
- Stamp Duty – Transfers of Intellectual Property may be exempt from stamp duty in Ireland making it feasible to transfer IP to an Irish resident company without incurring a documentary tax