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Ireland – A Leading Location for Holding and Managing

Intellectual Property
Ireland is a leading location for the and/or directors in Ireland with sufficient levels
development, exploitation and management of of expertise and skill to actually carry on the
intellectual property ("IP"). According to IDA trade.
Ireland, the number of global companies
In terms of a trade relating to IP, the Irish
centralising their IP management in Ireland
company should have employees and
has made Ireland one of the largest exporters
directors in Ireland who are genuinely
of IP in the world. One of the key drivers for
involved in the operation of the business
this is the attractive tax regime, including the
and all decisions of importance in terms
12.5% corporation tax rate on trading income,
of the management and control of the
a flexible 25% tax credit on the cost of eligible
business (at a strategic level) are
research and development activities, capital
undertaken in Ireland. There should be a
allowances on the cost of acquiring certain
intangible assets and a large double tax treaty certain degree of activity around the
network to facilitate the flow of funds between promotion and management of the IP and
Ireland and other countries. Ireland has staff with the appropriate skill and
signed double tax treaties with over 70 expertise would need to be located in
countries. The network of treaty partner Ireland to carry on this activity.
countries is set out in the Appendix. International IP Structures
Facts and Figures International companies generally adopt one of
Ireland is home to eight of the top ten global two alternative structures for holding and
technology companies, eight of the top ten managing IP out of Ireland.
global pharmaceutical companies and 15 of Structure 1
the top 25 medical devices firms in the world.
An Irish company can hold the IP and claim a
In recent years, Ireland has attracted a range deduction for capital expenditure incurred on
of innovative social media companies, the acquisition or development of the IP as
including Google, Facebook, Twitter and well as any interest expense incurred to
LinkedIn, all of whom have established their acquire the IP. The profits of the Irish
European headquarters here. company will typically be subject to the
Corporation Tax - Rate of Tax corporation tax rate of 12.5% if the company
has the requisite level of substance to be
Ireland has two rates of corporation tax on considered trading. The tax depreciation and
income. The 12.5% rate applies to trading interest expense can reduce the effective rate
income of an Irish company. The 25% rate of tax to a minimum of 2.5%.
applies to non-trading, or passive income.
Structure 2
Generally, trading means the carrying on of
business or the engaging in activities on a A foreign affiliate company can hold the IP and
regular basis with a view to realising a profit. licence the IP to an Irish company. In the case
The Irish Revenue Commissioners, in of certain US groups, this affiliate is often an
considering whether an activity constitutes the Irish incorporated, but non-Irish tax resident,
carrying on of a trade, look at whether there is company (perhaps resident in the Cayman
commercial rationale for the type of situation Islands). The Irish company can take a
proposed, whether there is real value added in deduction for royalty fees paid. There is also a
Ireland and whether there are employees wide range of exemptions from withholding tax
on royalties paid to foreign companies as
outlined below. The profits of the Irish on the transfer of specified intangible assets.
company will be subject to the corporation tax
Research and Development (R&D) Tax
rate of 12.5% so long as there is sufficient
activity and substance in Ireland.
R&D tax credits allow qualifying companies
Tax Deduction for Intangible Assets
involved in the carrying on of R&D activities to
Companies carrying on a trade in Ireland can benefit from a tax credit of 25% of R&D
claim a tax deduction on capital expenditure expenditure. The tax credit is in addition to the
incurred on the acquisition or development of corporation tax deduction at 12.5% for
certain "specified intangible assets" for the qualifying expenditure.
purposes of their trade. Intangible assets
The tax credit is used to reduce the company's
include patents, registered designs,
corporation tax liability and any unused portion
trademarks, certain know-how, domain names
can be carried forward indefinitely. In certain
and goodwill directly attributable to those
circumstances the tax credits can be converted
intangible assets.
into cash payments from the Revenue
The allowances will typically follow the Commissioners (this is useful for start-up or
accounting write-down but the company can early stage companies that are in a loss
elect for a fixed write-down period of 15 years making position). The amount of money that
(7% per annum and 2% in year 15). The can be claimed back is limited to the greater of
allowances can be offset against income (i) the corporation tax paid by the company for
generated from managing, developing or the preceding ten accounting periods and (ii)
exploiting the intangible assets or income from the payroll liabilities for the period in which the
selling goods or services that derived their expenditure on R&D activities was incurred.
value from the intangible assets. For a start-up company the limit will be the
payroll taxes for the period in which the
Allowances can be claimed where the
expenditure was incurred.
intangible asset is acquired from another party
(including an affiliate, where (arm's length Tax credits are available to companies within
pricing rules apply). In the context of transfers the charge to Irish tax that undertake R&D
of intangible assets between Irish group activities within the European Economic Area.
companies, allowances can be claimed where The relief is generally available for R&D
an election is made to opt out of certain capital activities carried out in areas such as software
gains tax group relief provisions. development, engineering, medical sciences,
pharmaceuticals, agriculture and horticulture.
The aggregate amount of any allowance and
related interest expense (i.e. interest incurred Patent Royalties – Payments to Foreign
to acquire the intangible asset) in an Companies
accounting period was previously capped at
Payments of patent royalties by an Irish
80% of the related annual income. This
resident company are typically subject to
restriction was removed by the Finance Act
withholding tax at 20%. Patent royalties paid
2014 for accounting periods commencing on
to associated companies resident in another
or after 1 January 2015 but has now been
EU Member State, or paid in the course of a
reinserted for accounting periods
trade or business to a company resident in a
commencing on or after 1 January 2018 but
country with which Ireland has a double tax
only in respect of intangible assets
treaty are generally exempt from withholding
purchased on or after 11 October 2017.
tax. The Revenue Commissioners issued a
Where the intangible asset is held for more Statement of Practice in 2010 which effectively
than 5 years there is no clawback of the extends the relief from withholding tax on
allowances on a disposal (unless the asset is certain patent royalties paid to non-treaty
sold to a connected company who wishes to countries. To avail of the exemption, certain
claim allowances). This is an important conditions apply which include the fact that the
measure as traditionally the risk of a future royalty must be paid in respect of a foreign
"recapture" of capital allowances can be patent and the payment must be made in the
problematic for companies with a high spend course of the Irish paying company's trade.
on capital. Prior approval of Irish Revenue will be required.
There is an exemption from Irish stamp duty

Knowledge Development Box
Qualifying expenditure on the qualifying assets,
The Irish Finance Act 2015 introduced a for the purposes of the KDB, means bona fide
'knowledge development box' ("KDB"), which expenditure incurred by a company wholly and
brought in an effective reduced rate of exclusively in the carrying on by it of R&D
corporation tax of 6.25% for qualifying income activities, where such activities lead to the
derived from 'qualifying expenditure' in the EU development, improvement or creation of the
by an Irish tax resident company. This relief "qualifying asset". Where expenditure on
applies to accounting periods which qualifying assets, carried out by a group
commence on or after 1 January 2018 and company, will not be qualifying expenditure for
before 1 January 2021. A claim must be made these purposes, it may be deemed as uplift and
within 12 months of the end of the relevant qualify as 'uplift expenditure', up to 30% of the
accounting period and should be made in the qualifying expenditure.
corporation tax return of the claimant company
for the period. Maples – Global Knowledge, Irish Expertise
The KDB was described when introduced as the Maples and Calder is a leading international
first OECD-compliant KDB in the world, which law firm advising financial, institutional and
means that it is in line with international business clients around the world on the laws
guidelines, the OECD Action 5 Report of the Cayman Islands, Ireland and the British
published on 5 October 2015 and specifically Virgin Islands.
the OECD's ‘Modified Nexus Approach’. Under MaplesFS
the Modified Nexus Approach, only the
expenditure incurred developing the intellectual Our affiliate business MaplesFS is an
property asset after it was acquired should independent global provider of specialized
qualify as qualifying expenditure. fiduciary, accounting and administration
services to corporate, finance and investment
Qualifying assets for the KDB include certain funds entities. MaplesFS offers a wide range
patented inventions and copyrighted software of expertise in accounting, company
will be 'intellectual property' for the purposes of management, corporate, fiduciary, trust and
the definition of 'qualifying asset'. The definition fund administration. This close working
also includes supplementary protection relationship offers clients the maximum
certificates for medicinal products, convenience and efficiency in establishing
supplementary protection certificates for plant and administering companies, funds and
protection products and plant breeders’ rights. investments.
The intellectual property must be the result of
R&D activities. Further information
Qualifying income for the KDB constitutes If you require any further advice or assistance
income derived directly from the qualifying please speak to your usual Maples contact or:
asset. The qualifying profit will be determined
by reference to a formula, set out below. A Andrew Quinn
deduction of 50% of the qualifying profit from +353 (0) 1 619 2038
the specified trade will be allowable, resulting
in an effective KDB tax rate of 6.25%. The
greater amount of R&D that takes place by William Fogarty
the Irish entity, the greater the proportion of +353 (0)1 619 2730
income that may qualify for the KDB tax rate.
Christine Fauroux
+353 (0)1 619 2770
+ Uplift x Qualifying = Qualifying February 2018
Expenditure Assets Profits © MAPLES AND CALDER
Overall This update is intended to provide only general
Expenditure information for the clients and professional contacts of
Maples and Calder. It does not purport to be
comprehensive or to render legal advice.

Ireland's Network of Double Taxation Treaties (as at February 2018)

Albania Luxembourg
Armenia Macedonia
Australia Malaysia
Austria Malta
Bahrain Mexico
Belarus Moldova
Belgium Montenegro
Bosnia Herzegovina Morocco
Bulgaria Netherlands
Canada New Zealand
Chile Norway
China Pakistan
Croatia Panama
Cyprus Poland
Czech Republic Portugal
Denmark Qatar
Egypt Romania
Estonia Russia
Ethiopia Saudi Arabia
Finland Serbia
France Singapore
Georgia Slovak Republic
Germany Slovenia
Greece South Africa
Hong Kong Spain
Hungary Sweden
Iceland Switzerland
India Thailand
Israel Turkey
Italy Ukraine
Japan United Arab Emirates
Kazakhstan* (*Signed but not yet in force) United Kingdom
Korea (Republic of) United States of America
Kuwait Uzbekistan
Latvia Vietnam
Lithuania Zambia