IP Firm of the Year 2010 Irish & European Patent and Trade Mark Attorneys
Tax exemption and patenting
19 September 2006 Tomkins & Co.
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Ireland's tax exemption on certain patent royalties has played a significant part in the country's economic success of the past decade. It has been a major consideration in the decision of many multinationals (particularly from the US) to set up substantial operations in Ireland. However, this scheme is not exclusively relevant to larger companies. It can be enjoyed by any organization - no matter the size - as long as specific provisions are satisfied.
In effect, certain income received under a "qualifying patent" can be received tax-exempt. There is a definition of what constitutes a qualifying patent but generally speaking it is one that protects an invention which was devised in Ireland. In order to benefit from the tax exemption a revenue stream needs to be generated under the qualifying patent and the company benefiting needs to be resident in Ireland. There are restrictions on the amount of income that can benefit from this tax exemption in certain circumstances. If the income is received from an independent third party who has licensed the technology, there is presently no upper limit on the amount of tax-exempt income that can be received. On the other hand, and is likely the case in most commercial situations, where the licensor and licensee are related parties, then there are a number of restrictions that may apply depending on the set up of the companies.
At TOMKINS, we draw on our expertise in the field of patent law to advise on the potential ways of enjoying this tax break. We provide advice specific to the circumstances and needs of our individual clients. Please contact us for more details.
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