Intellectual Property Location (Ireland)

What is Ireland's approach to Intellectual Property?

Ireland is an extremely attractive location for outbound US investment, with particular emphasis on US companies (amongst other jurisdictions) wishing to exploit their Intellectual Property (IP) from an Irish company with a view to consolidating its Rest of World (ROW) earnings in Ireland at a low corporate tax rate.

IP will generally be migrated from the home jurisdiction via cost sharing, buy in, or licence in mechanism.

In a variety of situations, one will see IP being transferred into Ireland prior to commercialisation, and hence the transfer in value may not significantly vary from the cost of getting it to that particular stage of development.

Hence the Irish company will then hold the IP while the remaining stages of development are complete and the IP will then reach a stage where commercialisation can occur to ROW.

What are the Benefits?

There are considerable benefits to establishing an IP vehicle in Ireland, with the principal one being that the income arising there from will be subject to corporation tax at 12½% providing the income is deemed to arise from an Irish trade as distinct from a passive trade or a foreign trade, which would then be taxed at 25%.

Mere ownership of an asset does not constitute a trade.

To ensure that the income is viewed as income from an Irish trade, it is necessary to illustrate physical presence in Ireland as represented by employees of the company actively involved in the exploitation of the Intellectual property. Employees need to actively manage, negotiate and market the licences.

How can IFG Help?

It is in this area of creating meaningful substance that IFG has significant success with clients. We assist the client with the employment of personnel in the undertaking and fulfilment of roles with commercial functions. IFG manage this process and indeed manage the overall functionality of the Irish office, covering aspects of commercial and financial management. This has been extremely successful in a variety of industries, namely software, pharma, film / TV distribution and on-line video games.

Summary

The Client obtains a tax efficient location which facilitates the exploitation of its intellectual property to the Rest of World, whilst generating those earnings in a low corporate tax environment.

IFG does not provide taxation or legal advice. The information and expression of opinion expressed in this briefing note are not intended to be a comprehensive study or to provide taxation or legal advice. Specific advice concerning individual situations should be taken and IFG can provide introductions to advisers who specialise in this area.