Ireland Introduces Knowledge Development Box

The Irish Minister for Finance has announced that a so-called Knowledge Development Box will be provided for in the next Finance Bill. Ireland's knowledge development box will apply to income arising from certain patents and copyrighted software which result from R&D carried on in Ireland. A tax rate of 6.25% will apply to such income. Where R&D is carried on outside of Ireland or arises from bought-in intellectual property, the preferential rate of tax is unlikely to apply. We await the publication of the Finance Bill to ascertain the exact details of the new regime, the treatment of gains and its interaction with Ireland's 25% tax credit regime for R&D and IP amortisation tax regime.

Ireland's attraction as a key location from which to conduct business should now be even further enhanced. Changes announced in the Irish Budget demonstrate Ireland's commitment to have its tax regime be one of the best in class and free from challenge under either OECD principles or EU law. While country-by-country reporting will create a further compliance burden for multinationals with an Irish holding company, it is merely part of the new world of accepting that a group's international tax affairs need to be capable of increased scrutiny in the new arena of openness.

For now, Ireland has once again provided an international agenda that promotes openness and transparency while maintaining a stable tax environment to remain as one of the best locations worldwide to conduct corporate activities.

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