general, profits or gains arising from a patent (whether received in
of royalties or as a capital sum) are taxed as income. However, Irish
legislation provides a tax exemption (limited to €5 million per annum)
income derived from “qualifying patents” when received by an individual
company resident in Ireland.
“qualifying patent” is defined as a patent in relation to which the
research, planning, processing, experimenting, testing, devising,
developing or similar activity leading to the relevant invention was
out in the European Economic Area. It is not necessary that the patent
be registered in Ireland
or indeed in another country of the EEA. However, the recipient of the
income must be Irish resident.
exemption is generally available from the date on which the patent is
A retrospective exemption may be available for income arising in the
between the date of filing of the final patent specification and the
which the patent is granted.
the patent holder is a company, Irish legislation also
provides for a tax exemption in respect of dividends paid by a company
in receipt of tax-free patent income, subject to certain restrictions
royalty income is received from a related company.
of the main advantages of holding patents in Irish corporate
structures is this ability to provide an opportunity to persons other
“original inventors” to share in tax free dividends. As there is no
that the patent royalty be payable in respect of an invention used for
activity located in Ireland, this exemption has been traditionally very
attractive to large international groups, making Ireland a popular
IP holding companies.
tax law also provides an exemption from stamp
duty on the sale, transfer or other disposition of intellectual
including patents, trade marks, copyright, designs, inventions, domain
supplementary protection certificates and plant breeder’s rights.
is also expressly
included in the exemption to
the extent that it is directly attributable to IP. This represents a
saving for companies engaged in the licensing of IP or other hi-tech
and therefore acts as a further incentive to locate IP rights in Ireland.
credits are available on research and development on up to 25% of
qualifying expenditure. The credits can be carried back one year as
well as forward. Where a company has insufficient corporation tax to
absorb the credits, they can instead be set off against payroll taxes
over three years.
Dividends from one Irish
tax-resident company to another are exempt from tax in the hands of the
recipient. Dividends received by an Irish company from a company
resident in a
country with which Ireland
has a tax treaty or which is an EU country may be sheltered by a tax
withholding or underlying taxes suffered; this is under either the
each particular treaty or the EU Parent/Subsidiary Directive.
Ireland has a system of
unilateral credit relief for withholding and underlying tax suffered on
dividends received from countries with which Ireland
does not have a tax treaty.
This relief also includes a credit for many state, local and municipal
suffered in countries with which Ireland has a tax treaty but which
not covered by the treaty (for example, US state taxes).
regime adds one major new feature to the Irish dividend credit system.
Companies can now 'mix' credits for foreign tax on different dividend
for the purpose of calculating the overall tax credit in Ireland
(this is called 'onshore
pooling'). Any excess credit unused can be carried forward indefinitely
offset in later years. Since Irish tax is only payable on dividends
received in Ireland,
allows companies great flexibility in allocating dividends from
periods and different countries to avoid any additional tax in Ireland.
practice, many of Ireland's
EU or treaty partners have tax rates higher than 25% and additional
on dividends is often not a real problem.
ability to onshore
pool only requires a 5% shareholding (direct or indirect) in the
dividend-paying company or that both companies are part of the same 5%
The dividend-paying company can be tax-resident in any