Ireland cuts tax for IP profits
Ireland has announced a new 6.25 per cent corporate tax rate for intellectual property research Ireland’s 12.5 per cent corporate tax rate is already one of the lowest in Europe, Economia reports.
Now, companies investing in research and development (R&D) will be able to avail of the even lower rate of 6.25 per cent under a new “knowledge development box” (KDB) announced in the budget last week.
The KDB corporation tax will allow profits related to patents and software copyrights to be taxed at 6.25 per cent. It aims to provide tax breaks for revenue and royalties derived from intellectual property held in Ireland.
Jobs minister Richard Bruton said the KDB would not only benefit Ireland’s multinational sector but also encourage indigenous R&D and foster innovation among home-grown start-ups and SMEs.
According to minister for finance, Michael Noonan, this will be the first patent box in the world to comply with the Organisation for Economic Co-operations and Development’s (OECD) new plan to close tax loopholes.
Multinationals headquartered in Ireland will be required to privately disclose their country-by-country revenue and profit activities. Apple, Google, Facebook and Microsoft all have operations in Ireland.
“This puts Ireland in a unique position to offer long-term certainty to innovative industries planning their research and development investments,” Noonan said. “This significant enhancement to our corporation-tax regime shows Ireland’s ability to retain our core strengths, while keeping a keen competitive edge in attracting quality jobs and investment to our country,” he added.
Jonathan Isaby, chief executive of TaxPayers’ Alliance said, “When a government reduces corporate taxes, it’s little surprise more businesses want to base themselves in that jurisdiction in order to enjoy the benefit of that increasingly attractive tax environment. Tax competition between nations is good because it drives down rates across the board. I hope that this latest decision by the Irish Government will prompt British ministers to follow suit or go even further.”
Critics argue that the royalties paid on intellectual property under such arrangements do not always adequately reflect where the inventions were made or where the innovations generate the most revenue.
