Intellectual Property (“IP”) refers to creations of the mind and includes inventions, literary and artistic works, product designs, brand-names, symbols, and logos. Generally, such creations are protected from infringement through formal IP rights such as patents, copyrights, industrial designs and trademarks.
Ireland is renowned as a jurisdiction for the domiciliation of IP globally, due to its strong protection of IP rights, pro-business environment, and advantageous tax regime.
We set out below, a snapshot of the reasons as to why Ireland is the location of choice for IP globally.
Protection of Intellectual Property Rights
When it comes to exploiting IP rights, a fundamental principle is the freedom to contract. In Ireland, parties have the flexibility to customise IP exploitation agreements according to their specific needs. However, it is important to note that EU competition law applies to agreements that impact inter-State trade within the EU. In the national context, Irish competition law mirrors EU rules.
For enforcing IP rights, the Irish High Court has extensive experience in handling commercial disputes and serves as an appropriate venue for resolving IP-related conflicts. Specifically, the Commercial Court, a division of the High Court, specialises in complex commercial disputes, including those related to IP matters.
The Irish Revenue Commissioners play a crucial role as the competent customs authority for addressing actions related to counterfeit and pirated goods. Additionally, Ireland has signed the International Agreement on a Unified Patent Court.
Common Law
The Irish Court system is a ‘common law’ jurisdiction. It shares this with other English-speaking countries, such as the UK, USA, Canada, Australia and New Zealand; and some non-English speaking countries, such as India. The Irish Court system is the only court system in the EU which is English-speaking, based on the common law and operates on the doctrine of precedent.
This system ensures familiarity with North American, British and Commonwealth legal systems while meeting all relevant international (Berne Convention, TRIPS Agreement and the 1996 Geneva Copyright treaties) and EU IP Directives. As one of the world’s largest exporters of computer software, Ireland’s wide range of legal protections have been trusted by the world’s biggest creators and owners of IP.
Additionally, the provisions in the Irish Trademarks Act 1996 and the Copyright and Related Rights Act 2000 which govern IP in Ireland are widely regarded as best-in-class and superior to many of our European partners.
Tax Regime
Ireland offers many advantages to companies looking to develop and nurture their IP. A 12.5% rate of corporation tax applies to trading income, such as royalty and other licensing income and to profits made on the sale of trading assets. To avail of Ireland’s attractive corporation tax rate, qualifying companies must be active and tax resident in Ireland. More importantly, the company’s operations must be carried on by staff with the relevant skills, expertise and authority to conduct and manage the development and exploitation of the IP in Ireland.
Knowledge Development Box
In its Budget 2016, Ireland introduced a Knowledge Development Box (“KDB”). The KDB applies relief to income from qualifying patents, computer programmes and certain other IP. A company may qualify for KDB if it has a usable qualifying asset that earns income and that was created as a result of qualifying Research and Development (“R&D”) activities. As per the KDB, trading profits earned from patented inventions and copyrighted software are taxed at an effective rate of 10% to the extent that those profits are related to any research and development undertaken by the company in Ireland or in another EU Member State. This arrangement is especially appealing for companies that want to establish their IP in Ireland. Firms eligible for KDB benefit from a reduced tax rate.
Tax Allowances For Intangible Assets
Ireland provides generous tax depreciation allowances for expenditure incurred on acquiring IP from group companies or third parties. This is highly advantageous for companies looking to domicile their IP in Ireland as it allows them to invest in new technologies or to migrate existing IP to Ireland in a tax efficient manner.
These write-offs may be claimed at a rate in line with the accounting treatment (i.e. depreciation) or over a period of 15 years at a rate of 7% for years 1 to 14 and 2% in the final year. The allowances are ring-fenced and are available only against income earned from managing, developing or exploiting specified intangible assets, including from the sale of goods or services that derive the greater part of their value from the IP (the “IP Trade”). The allowances granted may not reduce the income of the IP Trade by more than 80% in an accounting period while unused allowances may be carried forward to be utilised in future accounting periods.
Grants & Financial Support
The Irish government offers an extensive range of grants and financial support for R&D carried out in Ireland. Both the IDA and Enterprise Ireland offer extensive assistance programmes for companies involved in research and innovation activities. One of the most popular grants issued by these state agencies is the Technical Feasibility Study Grant, which aims to assist companies looking to investigate the viability of manufacturing a new product or creating a process to develop a new internationally traded service. The Technical Feasibility Grant covers 50% of qualifying expenses (excluding VAT), subject to a maximum contribution of €15,000.
Research and Development Tax Credits
Under Ireland’s R&D Corporation Tax Credit regime, an attractive tax credit is available to companies which carry out qualifying R&D activities. This credit is calculated at a rate of 30% of qualifying R&D expenditure for accounting periods commencing on, or after, 1 January 2024 and at a rate of 25% for accounting periods commencing before this.
The R&D Corporation Tax Credit regime has replaced the previously available R&D Tax Credit regime. A claim for the R&D Corporation Tax Credit is required to be made in respect of accounting periods commencing on, or after, 1 January 2023. Subject to meeting certain conditions, a company may elect to claim the R&D Tax Credit or the R&D Corporation Tax Credit during a transitional period. In general, the transitional period applies in respect of accounting periods ending between 31 December 2022 and 30 December 2023. Both credits are available at a rate of 25% of qualifying expenditure during the transitional period.
The changes to the R&D credit regime were introduced to align with the OECD Pillar Two GloBE rules. Under the previous regime, the R&D credits were first used to offset against corporation tax liabilities in the current accounting period and the preceding year followed by three payable instalments. Under the new regime a company may elect whether the R&D Corporation Tax Credit is offset against its tax liabilities or is paid to the company in 3 instalments as follows:
• The first payable instalment in year one, shall equal the greater of:
• €25,000, (or the amount of the R&D corporation tax credit, if lower) or
• 50 percent of the amount of the R&D corporation tax credit;
• The second instalment is based on three fifths of any balance of the remaining R&D Corporation Tax Credit; and
• The third instalment is any balance of the R&D Corporation Tax Credit remaining, being the credit claimed less the first and second instalment amounts already claimed.
To avail of such R&D credits, the R&D must be carried on in Ireland and/or the EEA or the UK, subject to specific conditions and limitations. Additionally, such R&D activities must seek to achieve scientific or technological advancement and involve the resolution of scientific or technological uncertainty. The relief is generally sought in areas such as software development, medical sciences, pharmaceuticals, engineering, agriculture and horticulture.
Pre-trading expenditure incurred on qualifying R&D activities can be claimed as a payable R&D credit over a three-year period from the year that the company commences to trade.
An R&D credit claim must be submitted to the Irish Revenue Commissioners within 12 months of the end of the accounting period in which the qualifying R&D expenditure was incurred, or in the case of pre-trading expenditure within 12 months of the end of the accounting period in which the trade commenced.
Other Tax Advantages
In Ireland, transfers of IP are exempt from stamp duty. This enables parties to transfer IP to an Irish resident company without incurring a documentary tax.
Additionally, under domestic legislation, Ireland does not impose withholding taxes on dividend payments made by an Irish resident company to a foreign parent company in either an EU or Tax Treaty jurisdiction. It also has implemented thin capitalisation rules that would limit the tax deductibility of interest paid to a parent company in these jurisdictions.
In line with OECD transfer pricing rules, Irish trading companies are obliged to conduct transactions with connected or related parties on an arm’s length basis. Depending on their size, small and medium sized enterprises will either be fully exempt from or have significantly reduced transfer pricing documentation requirements.
World Renowned Talent
Ireland boasts a highly educated, productive and young workforce. Additionally, Ireland has one of the youngest populations in Europe, a third of whom are under 25. This provides a wealth of human capital for companies seeking to establish and exploit IP in Ireland.
Take Aways
In conclusion, Ireland’s strong protection for IP rights, favourable tax regime, highly skilled workforce and array of government grants make it a perfect location to develop and exploit IP. As one of the best performing economies in the Eurozone, our reputation as a destination of choice for foreign direct investment is unrivalled. Moreover, our unique relationship with the USA provides Ireland with a significant edge when it comes to attracting foreign direct investment and research and development in recent decades.
If you’re looking for a well-established, pro-business environment to establish IP, Ireland is the perfect location to do so.
