Ireland plans 6.25 per cent patent-box tax as `Double Irish’ ends
Ireland will introduce a new lower tax on intellectual property to keep and win more overseas investment as the government phases out a controversial loophole known as the “Double Irish.”, reports Bloomberg.
The new knowledge development box will tax profits from patented innovations such as technological and pharmaceutical developments at 6.25 per cent, Finance Minister Michael Noonan said in parliament in Dublin on Tuesday. That’s lower than the standard company tax levy of 12.5 per cent.
The move aims to keep Ireland attractive for US companies as it phases out tax shelters that have been used by companies from Google Inc. to LinkedIn Corp. by 2020. Ireland has come under fire in the past for its tax treatment of multi-nationals, with the European Commission close to concluding an investigation into its arrangements with Apple Inc.
The patent box would compete with similar benefits offered by countries such as the UK and the Netherlands and be the first to meet new standards proposed by the Organization for Economic Cooperation and Development this month, according to Noonan. The UK’s patent box rate is 10 per cent.
“This is a competitive sport and Ireland wants to make sure it remains one of the most attractive locations for multinationals to do business,” said Dara Kelly, head of Grant Thornton LLP’s US-Irish business group in New York. “Such tax competitiveness is critical for Ireland as it’s stacked up against other jurisdictions.”
The “Double Irish” mechanism permits companies to collect profits through their Irish subsidiaries — often with real operations and employees in the country. Those units then route those profits through royalties and other payments to a second Irish subsidiary, headquartered in a tax haven like Bermuda, Grand Cayman or the Isle of Man.
Noonan used last year’s budget to close down the device to new entrants from January 2015, while companies already enjoying the tax break could continue to do so until 2020.
