Here is your first Forum » Ireland: a top choice for royalties

The reason Ireland is such an attractive option for royalty recovery is that there is generally no withholding tax on outgoing royalties (with the exception of patent and mining royalties, but even these may be exempt in certain circumstances).

For many licensing structures, Ireland will be the best location for an intermediary licensing company for the exploitation of all types of intellectual property. With its new, convenient capital grants system, Ireland is now an ideal location for the development, ownership and exploitation of intellectual property. It is important to remember that every case is different and proper advice must always be sought.

About license payments
Royalties from Irish companies may be subject to a 20% withholding tax. However, there is an exception if the recipient is a resident of an EU or contracting state in which royalties are subject to tax. Even where these conditions are not met, by appropriate structuring and by ensuring that the payment is not treated as Irish originating (i.e. ensuring that the patent is not registered or exploited in Ireland, that an Irish bank account is not used, and related agreements are not governed by Irish law etc.) it will in many cases still be possible for an Irish company to pay royalties on patents without any deduction for Irish withholding tax.

Structures where the Irish company is the intellectual property owner
Alternatively, an Irish company may be used to farm intellectual property that it has either developed internally or acquired (including from a related party, in which case the purchase price will be capped at arm's length for tax purposes). . Generous tax credits are available for income from the exploitation of intellectual property, including patents, copyright, trademarks and brands, and know-how (when the income is directly attributable to intangible assets). The allowances available correspond to the depreciation or amortization costs recorded in the balance sheet in accordance with generally accepted accounting principles.

The allowances can only be offset against income or sales from the use or exploitation of the intellectual property and are capped at 80% of the profits from such activities in any given year. With the right structuring, the average tax rate can be reduced to 2.5%. In order to qualify for Irish intellectual property tax relief, the Company must be actively using the product or derivative products in Ireland. This requires an office and staff in Ireland. This requirement does not apply to those using an offshore structure.

Note that appropriate structures could be put in place to ensure that dividends paid by the Irish company out of its after tax profits are not subject to withholding tax.