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:
4. WITHHOLDING TAX
In general, Irish resident companies must deduct 20% withholding tax on dividends and other profit distributions.
There are, however, a number of situations where shareholders can receive dividends free from withholding tax from an Irish resident company providing certain documentation is filed. For example:
1. Where the recipient of a patent royalty payment is resident in an E.U. member state or a country in which Irish has a double taxation treaty in place.
2. In situations where no tax treaty is in place, unilateral relief for foreign tax suffered on royalties received from abroad is available.
Extensive exemptions are available with regard to dividend payments to:
1. Irish resident companies
2. Pension Funds
3. Companies controlled by residents from an E.U. member state or tax treaty country and not under the control of Irish residents.
4. Companies that are not resident in an E.U. / treaty country but which are controlled by tax treaty residents
5. Individuals resident in an E.U. member state or tax treaty country
As a result of these exemptions it is generally possible to extract profits from an Irish resident company by way of dividends free from Irish tax.
A point to remember:
Withholding tax of 20% may apply to interest payments on loans/advances paid in the course of a trade or business to an E.U./Treaty country resident company. Providing the loan is capable of lasting in excess of twelve months no withholding tax should apply.
5. STAMP DUTY
Intellectual Property can be transferred to an Irish resident company without incurring Stamp Duty in Ireland.
Goodwill that is directly attributable to such IP is also covered by this stamp duty exemption.
Ireland has one of the most competitive tax structures for trading and holding companies. The main tax advantages are:
1. 12½% standard rate of Corporation Tax.
2. Significant Tax Credits for R&D Expenditure
3. No Capital Duty on incorporation.
4. Generally no Irish Stamp Duty on the transfer of Intellectual Property
5. Exemption for gains on the disposal of shares in a subsidiary company.
6. Tax Relief on the acquisition and development of Intellectual Property.
7. Exemption from withholding taxes to companies resident in E.U. member states and countries with which we have a double taxation treaty.
8. Availability of 25% Tax credit for capital expenditure incurred on buildings constructed or refurbished for the purposes of carrying on an R&D activity.