Ireland: Ireland As A Location For Your Intellectual Property Trading Company

Ireland offers many advantages to companies seeking to establish a base in Ireland to exploit intellectual property.

There is a low corporation tax rate in Ireland and it has what is considered to be a business-friendly taxation regime. In certain circumstances a company carrying on a trade of exploiting intellectual property which it has acquired can achieve a very low effective tax rate. Ireland is a common law jurisdiction with an independent and efficient court system, a wide range of legal protections for the creators/ owners of Intellectual Property Rights and the possibility of obtaining generous state grant assistance with research and development projects.

Ireland's highly educated, English-speaking workforce provides a wealth of human capital. A long-standing member of the European Union, it has strong trading links both in Europe and with the rest of the world. It also boasts a unique relationship with the USA, which has resulted in significant rates of foreign direct investment and research and development over recent decades.

We have set out below a brief overview of some of the tax, legal and funding advantages that Ireland has to offer companies looking at locating in Ireland to exploit or develop intellectual property.

TAX ISSUES

THE RATE OF CORPORATION TAX

One of the primary advantages that Ireland has to offer is its low rate of corporate tax. The standard rate of corporation tax on trading profits in Ireland is 12.5%.

In order to avail of the 12.5% rate of corporation tax a company must derive income from a trade that is actively carried on in Ireland. It is generally essential therefore that the profit making apparatus of the trade is located in Ireland and that the activity is controlled in Ireland. It is generally feasible for a company established in Ireland to exploit intellectual property to avail of the 12.5% rate if the company has sufficient personnel located in Ireland with the appropriate expertise and skills required to be in a position to manage the relevant portfolio of intellectual property.

Whilst company capital gains are generally subject to corporation tax, the gains are re-worked to ensure that the tax is charged at an effective 33% rate. Ireland has a participation exemption which exempts disposals of shares in certain companies provided certain conditions are met.

TAX RELIEF FOR CAPITAL EXPENDITURE ON INTANGIBLE ASSETS

Capital allowances can be claimed on capital expenditure incurred by companies on the provision of certain "specified intangible assets". The definition of specified intangible assets is widely drafted and includes, inter alia, the acquisition of or the licence to use:

  • patents and registered designs;
  • trademarks, brands, brand names, domain names and services marks;
  • copyright or related rights;
  • know-how, generally related to manufacturing or processing, secret information concerning industrial, commercial or scientific experience whether protected or not;
  • goodwill to the extent that it is directly attributable to specified intangible assets;
  • computer software or a right to deal in or use such software;
  • applications for grant or registration of patents, trademarks, copyrights etc; and
  • certain other rights.

The tax write off is granted as a capital allowance and the write off is available in line with the depreciation or amortisation charge for accounting purposes.

Alternatively, a company can elect to take the write off against its taxable income over a 15 year period. A clawback of the capital allowances claimed arises if the intellectual property is sold within five years of its acquisition (or 10 years in respect of capital expenditure incurred before 13 February 2013).

The capital allowances that are available can only be offset against income generated from exploiting intangible assets or as a result of the sale of goods or services that derive the greater part of their value from the intangible assets (referred to as a "relevant trade"). Furthermore, the aggregate amount of allowances that can be claimed was previously capped at 80% of profits from the relevant trade in a given accounting period. This cap has been removed with effect from 1 January 2015 so the aggregate amount of allowance is now 100%.

This relief can reduce the effective rate of corporation tax on intellectual property related income and helps to provide a valuable incentive to companies looking at locating their intellectual property operations in Ireland.

RESEARCH & DEVELOPMENT EXPENDITURE

Ireland also offers significant incentives to companies looking at locating their research and development ("R&D") activities in Ireland. There are two major incentives granted to companies that incur expenditure on R&D within Ireland and within the EEA generally (subject to certain conditions and limitations).

A company that incurs expenditure on R&D may avail of a tax credit of 25% on all R&D expenditure incurred on or after 1 January 2015.

The R&D credit reduces a company's corporation tax liability for the current year. The tax credit is in addition to tax deduction available at 12.5% for qualifying expenditure. The combined effect of these provisions is that it is possible to obtain tax relief at an effective rate of up to 37.5% of expenditure on R&D. The tax credit is available for offset against the current year corporation tax liability of the company or to be paid as 'tax free' remuneration to certain 'key employees' and any unused credit can be carried forward indefinitely to future periods. Excess credits can also be carried back against corporation tax paid in the previous period. Alternatively, a company may, provided certain conditions are satisfied, claim to have any remaining excess credit paid to it by the Revenue. The maximum repayment which can be claimed is limited to the greater of:

  1. the corporation tax paid by the company for the preceding 10 accounting periods; or
  2. the payroll liabilities (i.e. PAYE, PRSI and levies) accounted for by the company in the accounting period in which the qualifying R&D expenditure was incurred.

The tax credit is available on a group basis in respect of group expenditure on R&D. Relief is also available for a company that has not carried on all of the R&D itself:

  • A company which incurs expenditure on R&D can claim credit for certain amounts paid to a university to carry out R&D activities on its behalf. Relief in this case will be restricted to so much of the payment to the university as does not exceed the greater of €100,000 or 5% of the expenditure incurred by the company itself on R&D activities; and
  • A company which incurs expenditure on R&D can claim credit for certain amounts paid to another unconnected person (a person other than a university) to carry out R&D activities on its behalf. Relief in this case will be restricted to so much of the payment to the other person as does not exceed the greater of €100,000 or 15% of the expenditure incurred by the company itself on R&D activities.

Irish tax legislation also allows for a tax credit for capital expenditure on buildings or structures used for the purpose of carrying on R&D activity. Expenditure in this context extends to spending on the construction or refurbishment of a building or structure to be used to facilitate R&D. The tax credit amounts to 25% of the cost of the construction or refurbishment and is available on a proportional basis if at least 35% of the building is used for R&D facilities. The full R&D credit of 25% may be claimed in the year in which the expenditure was incurred. A 10 year claw back exists where the building or structure is sold or ceases to be used by the company for the purposes of R&D or for the purposes of the same trade.

There are a number of other features of Irish tax legislation which may be of benefit to companies seeking to establish a base in Ireland to exploit intellectual property.

CREDIT RELIEF FOR FOREIGN ROYALTY INCOME

Unilateral credit relief in respect of foreign withholding taxes on royalty income from non-treaty countries is available to companies in respect of royalties which are taxable as trading income.

WITHHOLDING TAX ON PATENT ROYALTY PAYMENTS

Patent royalties are the only form of royalty payment potentially subject to Irish withholding tax. A company can make patent royalty payments to a foreign company free of withholding tax if the recipient is:

  • not resident in Ireland; and
  • resident for the purposes of tax in a relevant territory (another EU Member State or in a country which has entered into a double taxation agreement with Ireland) which imposes a tax that generally applies to royalties receivable in that territory from outside sources.

In addition, royalties paid in respect of foreign registered patents can be paid to recipients outside of a relevant territory if certain conditions are met and with the prior approval of Irish Revenue.

DIVIDEND WITHHOLDING TAX (DWT)

Dividends paid by Irish resident companies are subject to a 20% withholding tax. However, there are a number of exemptions to enable dividends to be paid free from DWT. For example, dividends paid to any of the following persons are exempt from DWT:

  • a company or person resident in an EU/ treaty country (other than Ireland) and not under the control of Irish residents;
  • a company that is not resident in an EU/treaty country but is controlled by a person(s) who is/are resident in an EU/treaty country (other than Ireland) and which person(s) is/are not under the control of a person(s) not resident in an EU/treaty country (other than Ireland); or
  • a listed company or a 75% subsidiary of a listed company.

In each case, in order to avail of the exemption a declaration must be filed with the dividend paying company before the dividend is paid.

As a result of these exemptions it is generally possible to extract profits from an Irish resident company by way of dividends free from Irish tax.

STAMP DUTY

Transfers of intellectual property are exempt from stamp duty in Ireland. This exemption makes it feasible to transfer intellectual property to an Irish resident company without incurring a documentary tax.

TRANSFER PRICING

Provisions for the application of international transfer pricing norms apply in Ireland which require that transactions between associated entities be entered into "at arm's length." The provisions largely implement the OECD Transfer Pricing Guidelines and are relevant to IP trading companies to the extent that they are licensing IP to group companies or connected persons.

The regime only applies to trading transactions and there is an exemption for small and medium sized enterprises, specifically companies with fewer than 250 employees and either turnover of less than ¤50 million or assets of less than ¤43 million.

CONTROLLED FOREIGN COMPANY ("CFC") AND THIN CAPITALISATION RULES

Unlike many jurisdictions Ireland does not have any CFC or thin capitalisation rules.

IRISH INTELLECTUAL PROPERTY PROTECTION LAWS

The distribution of products/services that depend upon Intellectual Property Rights for a significant proportion of product value (books, film/video, music, software for example) from an Irish distribution base is a business activity that will enjoy significant and practical protection from Irish law. Indeed, the provisions of the Irish Trade Marks Act 1996 and the Copyright and Related Rights Act 2000 can be said to be "State of the Art" legislation. Owners of Intellectual Property will find that Irish law is better than the laws found in many of our major European partners. Better both in the sense that Irish law is up to date and in the sense that because Irish law is also based on the common law tradition it will be more familiar to North American, British and Commonwealth Businesses. Irish law meets the requirements of leading international texts such as the Berne Convention, the TRIPS Agreement and the 1996 Geneva Copyright treaties, as well as all relevant IP E.U. Directives. Ireland is one of the world's largest exporters of computer software and appropriate protections have been enshrined in Irish law to protect Intellectual Property Rights. Copyright laws in Ireland are currently under review to identify and, to the extent permissible under EU copyright directives, remove any barriers to innovation.

THE IRISH COPYRIGHT LANDSCAPE

The Irish copyright laws are informal; there is no need to register that a copyright exists. Protection for original literary and artistic works normally vests in the author and copyrights are freely transferable through licence agreements and assignments.

Irish copyright law now gives protection to original databases and, combined with the 15 year protection against unauthorised copying of the contents, the creators of multimedia works enjoy greater protection under Irish law than under most other copyright regimes.

The publishers of works in electronic format enjoy copyright protection in the form of film, sound recording and cable programme copyrights and broadcast organisations enjoy copyright protection for all kinds of distribution (cable, satellite). Internet distribution of works is specifically protected in the form of the "making available" right. Performers of works - musicians, actors, singers - enjoy copyright protection through a balanced system that involves contractual arrangements between performers and film, recording, and broadcasting industries.

Irish right holders operate within a well established and sophisticated network of collecting societies that have international links with similar organisations worldwide.

IRELAND AND COPYRIGHT ENFORCEMENT

A right holder seeking to enforce copyright in Ireland enjoys the benefits of a very sympathetic enforcement regime. A few of these features are worth highlighting:

  • self-help powers of search and seizure;
  • presumptions in court proceedings that the work is original and that the plaintiff is the owner of copyright in the work "unless the contrary is proved";
  • the ability to protect whistleblowers by concealing the identity of a source;
  • admissibility of hearsay evidence in certain circumstances;
  • criminal penalties of up to five years imprisonment and/or a fine of up to ¤127,000;
  • extensive court powers of search, seizure, confiscation and destruction of pirated copies;
  • wide powers to order payment of damages based upon conversion principles as well as the power to award punitive damages; and
  • speedy injunctive reliefs, including injunctive relief against internet service providers.

PATENTS

Under the Irish Patents Act 1992 (the "1992 Act"), full and short-term patents can be sought by registering an application with the Irish Patents Office. Alternatively, a patent may also be registered with the European Patents Office (EPO), provided the applicant has elected Ireland as a designated jurisdiction. In addition to setting out the application procedure, the 1992 Act enunciates the statutory prohibition against direct/ indirect infringement of a patent and/or contributory infringements.

A full-term patent lasts for 20 years, while a short term patent has a duration of 10 years. In late 2012/early 2013, Ireland signed the necessary agreements to enable it to participate in the unitary patent system. This system is subject to a number of additional steps before it can come into effect. Once in effect (which is likely to be late 2016, early 2017), an applicant may apply to the EPO for a patent with unitary effect in the participating EU Member States and such a patent shall enjoy protection in Ireland.

In a development that will be of interest to pharmaceutical companies operating, or intending to invest in Ireland, the 'Bolar' exemption in Irish patent law was broadened in late 2014 through the Intellectual Property (Miscellaneous Provisions) Act 2014. This exempts certain acts done with a view to satisfying the application requirements for a marketing authorisation for a product prior to the expiration of a patent.

Among the amendments made to the scope of the exemption are the following:

  • The exemption now covers applications for any marketing authorisation or similar instrument (rather than the previous wording that limited it to marketing authorisations set out in the underlying Directives 2004/27/EC and 2004/28/EC (i.e applications for marketing authorisations for generics and biosimilars)). The exemption should now be broad enough to cover applications in respect of new active substances.
  • The exemption clarifies that it extends to applications for a marketing authorisation in any third country (including outside the EU) as well as in the State; and
  • The use of the terminology in the legislation relating to a marketing authorisation that is required under Irish or foreign law "in order to sell or supply or offer to sell or supply" should cover a range of regulatory requirements that might arise under the laws of Ireland or of a third country.

REGISTERED DESIGNS

While Irish design law meets international standards in all respects, it has been specifically tailored to encourage inward investment and innovation in manufacturing (specifically spare parts) by limiting protection for functional, 'must-fit' and 'must-match' designs.

TRADE MARKS

The area of Trade Marks is regulated in Ireland by the Trade Marks Act 1996. In addition to domestic legislation, Ireland is also a party to the Community Trade Mark System, which provides for the registration of EU wide trade marks.

RESEARCH, DEVELOPMENT AND INNOVATION (RD&I) SUPPORT PROGRAMME

The Irish Government offers a range of financial support/grants for R&D carried out in Ireland.

The two state agencies (IDA Ireland and Enterprise Ireland) offer a full range of programmes to assist companies with research and innovation activities including funding, support for in-house R&D, sourcing new technologies and partnerships with other companies and third level institutions. Enterprise Ireland supports companies through the provision of grants dependant on the specific nature of the R&D required. A Technical Feasibility Study Grant will assist a company in investigating the viability of manufacturing a new product or process or to develop a new internationally traded service and is available to companies with more than ten employees and that engage in an eligible service activity or manufacturing in Ireland. The grant funding available is restricted to 50% of eligible expenditures up to a maximum of ¤35,000.

R&D funding is also available in the form of Small Project Grants and Standard Project Grants for manufacturing or internationally traded services companies that can show adequate cash resources to implement the proposed project.

For large companies, the grant is restricted to 25% of the costs of the project, if the research is considered innovative and technically challenging and involving significant risk. This can be increased by 15% where there is collaboration between two companies, subject to a maximum grant of 50%. RD&I support is subject in all cases to an upper limit in respect of a particular industrial undertaking depending on the nature of the expenditure. Applications for support of up to ¤650,000 should be made to the R&D Fund Committee, and for amounts greater than that to the Investment Committee of Enterprise Ireland. While generally, the maximum R&D grant a company can receive is ¤650,000, projects in excess of this amount are evaluated on a case by case basis and higher grants are capable of being awarded.

OTHER RESEARCH SUPPORT PROGRAMMES

The IDA provides support for research, development and innovation operations, while the Enterprise Ireland Innovation Partnership Programme provides financial support to encourage companies to undertake collaborative projects with Irish third-level institutions.

See: http://www.idaireland.com/businessin-ireland/activities/research-development-and-innovation/ for further detail on IDA Ireland RD&I Grant assistance;

http://www.enterprise-ireland.com/en/Research-Innovation for further detail on Enterprise Ireland RD&I assistance; and

http://www.sfi.ie/funding/funding-calls/open-calls for further detail on grants available from Science Foundation Ireland.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.