For more information, please don't hesitate to get in touch with one of our experts:
James Wolsey
Consultant, IP Migration Services
email: [email protected]
Kieran Desmond
Managing Director
email: [email protected]
James Wolsey
Consultant, IP Migration Services
email: [email protected]
Kieran Desmond
Managing Director
email: [email protected]
Ireland is a highly attractive location to locate intellectual property for further Development, Enhancement, Maintenance, Protection and Exploitation (DEMPE) activities. When companies are migrating intellectual property to Ireland, QSV Group can help to save hundreds of thousands of euros annually through the provision of cost-effective support services that are tailored to meet the specific requirements of each client. These services include:
Ireland is and will continue to be a member of the EU post Brexit and Irish companies will continue to have unrestricted access to the EU market and benefit from the EU intellectual property regime. Therefore, UK companies setting up subsidiaries in Ireland and assigning IP rights to the subsidiaries for the EU could continue to have full market access and IP protection. Other key benefits include:
Additional information is provided below for broad guidance only. Please contact your legal and tax advisors for advice specific to your circumstances.
Requirements to vail of the 12.5% corporate tax rate
To avail of the 12.5% rate of corporation tax, a company must derive income from a trade that is actively carried on in Ireland. It is essential therefore that the profit-making apparatus of the trade is in Ireland and that the activity is controlled in Ireland. This means that the company must have sufficient personnel located in Ireland with the appropriate expertise and skills required to be able to manage the relevant portfolio of intellectual property.
Requirements for claiming exemption from Dividend Withholding Tax (DWT)
Dividends paid by Irish resident companies are subject to a 20% withholding tax. However, there are several exemptions to enable dividends to be paid free from DWT. For example, dividends paid to any of the following persons are exempt from DWT:
Because of these exemptions it is generally possible to extract profits from an Irish resident company by way of dividends free from Irish tax. Since Ireland has, for many years, had a bilateral double taxation agreement with the UK and is consequently a “treaty country”, it is thought that UK companies will continue to benefit from the DWT exemption post Brexit.
Withholding tax on patent royalties
Patent royalties are the only form of royalty payment potentially subject to Irish withholding tax. A company can make patent royalty payments to a foreign company free of withholding tax if the recipient is not resident in Ireland and is resident for the purposes of tax in a relevant territory (another EU Member State or in a country which has entered into a double taxation agreement with Ireland) which imposes a tax that generally applies to royalties receivable in that territory from outside sources.
In addition, royalties paid in respect of foreign registered patents can be paid to recipients outside of a relevant territory if certain conditions are met and subject to the prior approval of Irish Revenue. As Ireland has a bilateral double taxation agreement with the UK, it is thought that patent royalties can continue to be paid to UK companies free of withholding tax post Brexit.
Stamp duty
Transfers of intellectual property are exempt from stamp duty in Ireland. This exemption makes it feasible to transfer intellectual property to an Irish resident company from a UK company without incurring stamp duty.
Transfer pricing
Provisions for the application of international transfer pricing apply in Ireland and require that transactions between associated entities be “at arm’s length.” The provisions implement the OECD Transfer Pricing Guidelines and are relevant to IP trading companies to the extent that they are licensing IP to group companies or connected persons. The regime only applies to trading transactions and there is an exemption for small and medium sized enterprises, specifically companies with fewer than 250 employees and either turnover of less than €50 million or assets of less than €43 million.
Controlled Foreign Company (“CFC”) and thin capitalisation rules
Unlike certain other jurisdictions, Ireland does not have any CFC or thin capitalisation rules.
The European intellectual property regime and Irish IP trading companies
Patents
The UK’s participation in the existing European patent system would be unaffected by Brexit. The system is governed by the European Patent Convention and is independent of the EU. Non-EU members (including Norway, Switzerland and Turkey) are signatories to the Convention and participate in the system. Following Brexit, UK and non-UK patentees would, as they can now, be able to make a central application to the European Patent Office (EPO) designating the UK and, via that route, obtain national UK patent rights.
However, most EU states are in the process of implementing a new nearly EU-wide patent with its own dedicated court system. This new Unitary Patent will be obtained through the EPO in a manner identical to that used for existing European Patent Convention patent applications: a single application will be filed at the EPO, designating all EU states. Within a month after grant by the EPO, the patent owner has the option to file a request for unitary effect, which will lead to his patent then becoming a single Unitary Patent in all the EU member states which have signed up to the new patent system and have ratified the relevant agreements as of the date the request is filed.
The new Unitary Patent will have its own court – known as the Unified Patent Court – which will deal with validity and infringement. The new court will have multiple branches throughout Europe, each of which will be able to grant a Europe-wide injunction against a patent infringer because of a single set of legal proceedings in a single court. Equally, the new court will also have powers to centrally revoke a unitary patent across all the countries it has effect in. The Unified Patent Court will have a branch in Dublin.
Following Brexit, the UK will not be able to apply for Unitary Patents or have the benefit of bringing proceedings in the Unified patent court. Irish IP trading companies will be able to apply for Unitary Patents and enforce those patents through the Unified Patent Court in Dublin.
EU Trade Marks
New EU Trade Mark (EUTM) filings post-Brexit will not cover the UK. An applicant will have to apply for a separate UK national trade mark. That would mean that an applicant would incur increased trade mark protection and maintenance costs as a result of having to make two separate applications to achieve the same geographical coverage as an EUTM currently offers. Brexit would also have other consequences for EUTMs:
Designs
Registered Community Designs (RCDs) are akin to EUTMs. Many of the issues raised in relation to EUTMs would also apply to RCDs. In particular with Brexit, new and existing RCDs would not cover the UK, meaning that conversion of a RCD into a UK registered design, or a separate application for UK registered design protection, would be required. Equally, unregistered community designs would only give protection for the remaining parts of the EU, and only if and when they were made available to the public in the EU. This means that designers in the UK would be set to lose a strong and inexpensive IP right to defend their designs against copying unless they are assigned to or new applications are made by an Irish IP trading company.
- Company incorporation
- Arranging leased/licensed office space (serviced or semi-serviced)
- Directorship services - provision of a qualified director with IP expertise
- Provision of a part-time IP Specialist as employee
- Financial reporting (including accounting, VAT and CIT compliance, payroll and audit support) services
- Corporate secretarial and financial administrative services
- Assistance with R&D grant applications
Ireland is and will continue to be a member of the EU post Brexit and Irish companies will continue to have unrestricted access to the EU market and benefit from the EU intellectual property regime. Therefore, UK companies setting up subsidiaries in Ireland and assigning IP rights to the subsidiaries for the EU could continue to have full market access and IP protection. Other key benefits include:
- favourable corporate tax regime in Ireland for IP trading companies (12.5%)
- no dividend withholding tax on dividends remitted to the U.K. by the Irish company
- 25% tax credit for qualifying Research and Development expenditure for companies engaged in in-house qualifying research and development undertaken within the European Economic Area. This credit may be set against a company's Irish Corporation Tax liability
- tax relief on the acquisition of intellectual property in certain circumstances
- Knowledge Development Box. The Irish Government recently published the Knowledge Development Box (Certification of Inventions) Bill 2016. The Bill, which is likely to be enacted by the end of 2016, will enable small and medium sized companies engaged in research and development activities to avail of a 6.25% corporate tax rate on income generated from commercialising certain intellectual property (subject to certain conditions being met).
Additional information is provided below for broad guidance only. Please contact your legal and tax advisors for advice specific to your circumstances.
Requirements to vail of the 12.5% corporate tax rate
To avail of the 12.5% rate of corporation tax, a company must derive income from a trade that is actively carried on in Ireland. It is essential therefore that the profit-making apparatus of the trade is in Ireland and that the activity is controlled in Ireland. This means that the company must have sufficient personnel located in Ireland with the appropriate expertise and skills required to be able to manage the relevant portfolio of intellectual property.
Requirements for claiming exemption from Dividend Withholding Tax (DWT)
Dividends paid by Irish resident companies are subject to a 20% withholding tax. However, there are several exemptions to enable dividends to be paid free from DWT. For example, dividends paid to any of the following persons are exempt from DWT:
- a company or person resident in an EU/ treaty country (other than Ireland) and not under the control of Irish residents
- a company that is not resident in an EU/treaty country but is controlled by a person(s) who is/are resident in an EU/treaty country (other than Ireland) and which person(s) is/are not under the control of a person(s) not resident in an EU/treaty country (other than Ireland)
- a listed company or a 75% subsidiary of a listed company.
Because of these exemptions it is generally possible to extract profits from an Irish resident company by way of dividends free from Irish tax. Since Ireland has, for many years, had a bilateral double taxation agreement with the UK and is consequently a “treaty country”, it is thought that UK companies will continue to benefit from the DWT exemption post Brexit.
Withholding tax on patent royalties
Patent royalties are the only form of royalty payment potentially subject to Irish withholding tax. A company can make patent royalty payments to a foreign company free of withholding tax if the recipient is not resident in Ireland and is resident for the purposes of tax in a relevant territory (another EU Member State or in a country which has entered into a double taxation agreement with Ireland) which imposes a tax that generally applies to royalties receivable in that territory from outside sources.
In addition, royalties paid in respect of foreign registered patents can be paid to recipients outside of a relevant territory if certain conditions are met and subject to the prior approval of Irish Revenue. As Ireland has a bilateral double taxation agreement with the UK, it is thought that patent royalties can continue to be paid to UK companies free of withholding tax post Brexit.
Stamp duty
Transfers of intellectual property are exempt from stamp duty in Ireland. This exemption makes it feasible to transfer intellectual property to an Irish resident company from a UK company without incurring stamp duty.
Transfer pricing
Provisions for the application of international transfer pricing apply in Ireland and require that transactions between associated entities be “at arm’s length.” The provisions implement the OECD Transfer Pricing Guidelines and are relevant to IP trading companies to the extent that they are licensing IP to group companies or connected persons. The regime only applies to trading transactions and there is an exemption for small and medium sized enterprises, specifically companies with fewer than 250 employees and either turnover of less than €50 million or assets of less than €43 million.
Controlled Foreign Company (“CFC”) and thin capitalisation rules
Unlike certain other jurisdictions, Ireland does not have any CFC or thin capitalisation rules.
The European intellectual property regime and Irish IP trading companies
Patents
The UK’s participation in the existing European patent system would be unaffected by Brexit. The system is governed by the European Patent Convention and is independent of the EU. Non-EU members (including Norway, Switzerland and Turkey) are signatories to the Convention and participate in the system. Following Brexit, UK and non-UK patentees would, as they can now, be able to make a central application to the European Patent Office (EPO) designating the UK and, via that route, obtain national UK patent rights.
However, most EU states are in the process of implementing a new nearly EU-wide patent with its own dedicated court system. This new Unitary Patent will be obtained through the EPO in a manner identical to that used for existing European Patent Convention patent applications: a single application will be filed at the EPO, designating all EU states. Within a month after grant by the EPO, the patent owner has the option to file a request for unitary effect, which will lead to his patent then becoming a single Unitary Patent in all the EU member states which have signed up to the new patent system and have ratified the relevant agreements as of the date the request is filed.
The new Unitary Patent will have its own court – known as the Unified Patent Court – which will deal with validity and infringement. The new court will have multiple branches throughout Europe, each of which will be able to grant a Europe-wide injunction against a patent infringer because of a single set of legal proceedings in a single court. Equally, the new court will also have powers to centrally revoke a unitary patent across all the countries it has effect in. The Unified Patent Court will have a branch in Dublin.
Following Brexit, the UK will not be able to apply for Unitary Patents or have the benefit of bringing proceedings in the Unified patent court. Irish IP trading companies will be able to apply for Unitary Patents and enforce those patents through the Unified Patent Court in Dublin.
EU Trade Marks
New EU Trade Mark (EUTM) filings post-Brexit will not cover the UK. An applicant will have to apply for a separate UK national trade mark. That would mean that an applicant would incur increased trade mark protection and maintenance costs as a result of having to make two separate applications to achieve the same geographical coverage as an EUTM currently offers. Brexit would also have other consequences for EUTMs:
- Pan-European injunctions based on EUTM rights would no longer cover the UK. For any new injunction applications post-Brexit, the EUTM owner would need to bring two sets of proceedings where an infringement is occurring in one or more EU member states and in the UK. One set of proceedings would be needed before an EUTM court for a pan-European injunction to prohibit the infringement in the EU member state(s). Another set of proceedings would be needed before the UK courts in respect of the UK infringement. This will result in increased litigation costs.
- The UK would fall outside the scope of existing pan-European injunctions. An EUTM owner would need to bring proceedings before the UK courts seeking a fresh injunction to prohibit a UK infringement which was previously covered by the Europe-wide injunction. This would, again, result in increased cost.
- An EUTM that has only been used solely or primarily in the UK could be vulnerable to revocation. The EUTM Regulation provides that an EUTM can be revoked where there has been no genuine use of the mark in the EU for a continuous five-year period and there are no proper reasons for non-use. Following Brexit, use in the UK is unlikely to count. EUTMs that have been assigned to an Irish IP trading company (and new applications made by the Irish IP trading company) can be enforced in Europe through pan-European injunctions.
Designs
Registered Community Designs (RCDs) are akin to EUTMs. Many of the issues raised in relation to EUTMs would also apply to RCDs. In particular with Brexit, new and existing RCDs would not cover the UK, meaning that conversion of a RCD into a UK registered design, or a separate application for UK registered design protection, would be required. Equally, unregistered community designs would only give protection for the remaining parts of the EU, and only if and when they were made available to the public in the EU. This means that designers in the UK would be set to lose a strong and inexpensive IP right to defend their designs against copying unless they are assigned to or new applications are made by an Irish IP trading company.