International Business

Ireland's Intellectual Property framework is considered to be one of the strongest in Europe. The primary legislation seeks to protect patents, trademarks, copyrights and designs. It provides for many taxed based incentives for expenditure on IP.

The range of assets qualifying for relief is extensive and includes brands, trademarks, copyrights, publishing rights and patents. Companies carrying on trade are entitled to claim a tax write-off for the capital cost of purchasing or developing qualifying intangible assets. Through our knowledge and experience in this area, we can advise on issues such as

Ireland's Intellectual Property framework:

• Identifying intangible assets that qualify for the reliefs
• Maximizing relief available under the new intangible asset regime
• Advising on qualifying deduction for IP purposes
• Advising on optimal use of licensing using Ireland IP regime
• Identification and valuation of IP

We also work closely with Intellectual Property solicitors to identify and value intellectual property assets.

The tax advantages of an Irish company:

• Low Corporation Tax rate incentive of 12.5% on trading profits, without limit
• Finance Act 2011 introduced an extension to the 0% corporate tax rate incentive for new start-up companies for the first three years of trading
• Dividends received by an Irish holding company from trading profits of a subsidiary are generally taxed at 12.5% Corporation Tax
• Limited transfer pricing legislation which only applies to large companies
• Capital Gains Tax exemption incentive for disposal of shares in a subsidiary company subject to certain conditions
• Extensive double tax treaty network
• The ability to combine trading activities with its holding company function No 'Controlled Foreign Company (CFC)'' or 'Thin Capitalization rules
• Low capital start-up costs

An R&D tax credit is a valuable tax-based incentive designed to encourage investment in research and development by companies in Ireland. A 25% credit is available in addition to the ordinary Corporation Tax deduction at the standard rate of 12.5%. Therefore, the total benefit could be worth €37.50 for every €100 spent on a company's R&D activities.

The credit is generally available for R&D activities carried out in a wide variety of science and technology areas such as software development, engineering, food and beverage production, medical devices, pharmaceuticals, financial services, agriculture and horticulture.

From our experience, many companies are not aware of their entitlements to claim an R&D tax credit for the work they are carrying out. We would encourage all companies to investigate their entitlement to claim a credit.

R & D Tax Credits>

Along with our associates, we can assist and advise clients on the following:

Review the R&D activities and costs to determine those which qualify for tax relief and maximising R & D tax relief

Prepare reports on qualifying R&D activities and expenditure for submission to the Revenue Commissioners

Correspond with the Revenue Commissioners regarding the R&D claim

The viability and likelihood of the success of an R&D claim

A claim for an R&D tax credit involves identifying and documenting qualifying R&D activities and associated expenditure in a manner that meets the strict requirements of the legislation and Revenue guidance.

The R&D credit is also available in respect of expenditure incurred on the construction (including refurbishment) of a building where R&D activities carried on by a company in that building over a 4 year period represent at least 35 per cent of all activities carried on in that building. The credit allowed is in proportion of the use of the building for R&D purposes over that 4 year period.

Dividend Withholding Tax

Withholding Taxes normally apply to payments of dividend and interest by an Irish corporation. There are certain 'excluded' persons where the payment is made within Ireland. If the payment is made to a 'qualifying non-Irish resident person' then exemption from the requirement to deduct withholding tax may be made. The recipient normally has to be located in an EU or double tax treaty country to qualify.

Where a dividend payment or other distribution is made directly to an exempt shareholder by the company or by an authorised withholding agent, the shareholder is required to provide evidence of entitlement to the exemption to the company or the authorised withholding agent. If the dividend payment or other distribution is made through a qualifying intermediary, the evidence of entitlement to an exemption must be given to the intermediary.

Non-residence and exemption in the case of those non-resident individuals who are eligible for exemption from the withholding tax, entitlement to the exemption is established by the making of a declaration of non-residence which must be supported by a certification procedure (i.e. a certificate of tax residence from the tax authorities of the country in which the individual is resident for tax purposes).

In the case of qualifying non-resident companies, entitlement to the exemption is also established by means of a declaration which must be supported by a certificate from the company's auditors of the company's status and in certain cases by a certificate of residence from the tax authorities of the country in which the company is resident for tax purposes.

This aids the repatriation of profits to overseas jurisdictions giving the foreign shareholder a significant cash flow benefit.

The current rate of withholding tax is at the standard rate in Ireland of 20% on dividends where applicable. Irish individual shareholders are taxable on the gross dividend at their marginal rate but are entitled to a credit for the tax withheld by the company paying the dividend. Repayments are made where the shareholder's tax liability is less than the tax withheld.

Interest and Royalties
Under the Interest and Royalty Directive, Irish Withholding Tax should not arise on all types of interest and royalty payments made by an Irish tax resident company where certain conditions are satisfied. The main conditions are as follows:

• The Irish company and the receiving company are regarded as “associated companiesâ€, i.e. for a continuous period of two years, one company controls 25% of the voting power of the other, or both are 25% controlled by a third company;
• The receiving company and, where applicable, the third company are tax resident in the EU.

Domestic and international tax laws allow Irish companies to make interest and royalty payments to recipients located outside of Ireland in a tax efficient manner. In the majority of cases, interest and royalties may be paid by Irish companies to recipients located in the EU or DTT countries, free of Irish WHT.

Relief for Withholding Taxes and Credit for Foreign Taxes
In general, Ireland imposes Withholding Tax on royalty payments paid to non-residents where it is a patent royalty or one where the royalty is regarded as “pure income profitâ€. Where Irish Withholding Tax applies, all of Ireland's double taxation treaties either substantially reduce or entirely eliminate Irish Withholding Tax on royalties paid to a non-resident treaty jurisdiction.Furthermore, relief from withholding tax may also be available under the EU Interest and Royalties Directive in respect of intra-EU transactions.

In addition to the above, a recent Finance Act introduced unilateral relief for foreign tax suffered on royalties received from abroad. This generally results in no further liability to Irish tax arising as Ireland's tax rates are normally lower than the payer's jurisdiction.

Ireland currently holds and continues to negotiate a network of double tax treaties which eliminate the need to pay tax twice on the same income/gains of international companies. Because of the extensive list of tax treaties that it has in place, Ireland is renowned as one of the best countries in the world in which to incorporate a company.

Double Tax Treaties, Australia, Finland, Lithuania, Romania, Austria, France, Luxembourg, Russia, Belgium, Germany, Macedonia, Slovak Republic, Bulgaria, Greece , Malaysia, Slovenia, Canada , Hungary, Malta, South Africa, Chile, Iceland, Mexico, Spain, China, India ,Netherlands, Sweden ,Croatia, Israel, New Zealand , Switzerland, Cyprus, Italy, Norway, UK, Czech Republic, Japan, Pakistan, USA, Denmark, Republic of Korea, Poland, Vietnam ,Estonia, Latvia Portugal Zambia

Amit Babbar & Company are proud to be members of IR Global, an international network of accountants, tax consultants and legal professionals. IR Global is the fastest growing professional service firm network in the world with over 800 members across over 150 jurisdictions. Each member of the group passes a stringent vetting procedure upon joining ensuring that only competent and quality firms are accepted for membership.

Being members of IR global enables clients of the firm to be supported with the highest quality support and advice in all accounting, tax and legal matters in international markets. The network provides us with global reach and representation, as well as immediate access to local expertise and the ability to conduct cross border assignments in collaboration with fellow member firms to better serve our clients' needs.

IR Global is committed to working with like-minded member firms, clients and strategic partners to make a positive difference in business and society.