The Governments’ strategy of building a “smart economy” includes a commitment to invest heavily in research and development, incentivise multinational companies to locate for R&D capacity in Ireland and ensure the commercialisation and retention of ideas that flow from that investment.
Coupled with this, Finance Act 2009 introduced a tax incentive regime for the acquisition of intangible assets through the provision of capital allowances on capital expenditure incurred by companies on specified assets.
Allowances are available for capital expenditure incurred after 7 May 2009 on the acquisition of qualifying assets including:
- Patents and registered designs
- Trademarks and brand names
- Know-how (definition extended by Finance Bill 2010)
- Domain names, copyrights, service marks and publishing titles
- Authorisation to sell medicines, a product of any design, formula, process or invention (and any rights derived from research into same)
- Goodwill, to the extent that it directly relates to the assets outlined above.
Finance Bill 2010 (with effect from 04/02/2010) extends the list of specified intangible assets that qualify for the regime to applications for the grant and registration of some of the existing specified intangible assets.
Companies carrying a trade will be entitled to claim a tax write-off for the capital cost of acquiring Intellectual Property (“IP”) assets. Allowances are available for offset against income generated from exploiting IP assets or as a result of the sale of goods or services that derive the greater part of their value from the IP. To the extent that a company carries out other activities, it will be necessary to treat those activities as a separate trade, with ring-fencing of deductions.
The IP regime is seen as a stepping stone that provides Irish based companies with the opportunity to extract value from their IP assets and is in general welcomed by multinationals to locate here.
At BDO we can advise on the appropriate IP structures that may be used, relocating IP to Ireland and maximising returns from the exploitation of IP.
Specified Intangible Assets
Finance Act 2015 introduced Ireland’s newest tax incentive for innovative companies; the Knowledge Development Box (“the KDB”).
The KDB offers an effective tax rate of 6.25% on qualifying profits generated in periods commencing on or after 1 January 2016. As the first OECD compliant box-type regime, the relief available is linked to the percentage of qualifying R&D expenditure incurred in Ireland.
Given the links between the KDB and the R&D tax credit legislation, companies that already claim the credit should examine the potential benefits of also accessing the KDB regime.
Find out more on KDB