Apart from a highly skilled, English speaking workforce; membership of the E.U.; an excellent standard of living for employees seconded to Ireland; a large network of international routes and a successful track record of investment, research and development from United States corporations there are many advantages to setting up Intellectual Property Trading companies in Ireland.
The main focus of this article is the tax advantages which can be summarized under the following headings and viewed in Parts 1 through 4 on TaxConnections Worldwide Tax Blogs:
1. CORPORATION TAX
Ireland has one of the lowest corporation tax rates on trading income in the world. The standard rate is 12½% on trading profits.
A 25% rate is charged on non-trading and foreign source income. It is the rate applied to “passive income.”
To be eligible for the 12½% Corporation Tax rate the following criteria must apply:
1. The company must be a trading company.
2. The trade must be carried on in Ireland.
3. The trading activity must be controlled in Ireland.
4. The profit making apparatus must be located in Ireland.
Does your company qualify for the 12½% rate?
If your company is an Intellectual Property Trading Company established in Ireland with a workforce of individuals specialised in:
• Managing the intellectual property portfolio
• Developing and exploiting Intellectual property
• Promoting and licensing intellectual property rights for use by third parties
Your company should be eligible for the 12½% rate of Corporation Tax. If, however, there is any doubt, it is possible to obtain an advanced decision from the Irish Revenue Commissioners. If the company does not qualify as a trading company, the 25% corporation tax rate will apply.
Other factors to be considered in the context of eligibility for the 12½% tax rate for IP companies include:
• Strategic and operational exploitation and management of the Intellectual Property in Ireland.
• The Irish company should incur marketing, legal and R & D expenditure in relation to the IP.
• The Irish company should be responsible for the development and protection of the IP.
A point to keep in mind:
An Irish resident investment company which is in receipt of certain trading dividends can make an election for those dividends to be taxable at the 12½% rate.