In a move that is likely to enhance Ireland’s tax competitiveness, the Department of Finance has launched a public consultation on the introduction of a new incentive to locate high-value IP jobs in Ireland – the Knowledge Development Box (KDB). While no details are available yet (and external factors need to be taken into account – see below) it is understood that the KDB will provide for a preferential effective tax rate to income generated from intellectual property where certain risks or functions are located in Ireland.
The KDB will be based in part on similar measures (such as the UK patent box) which have existed for many years in countries that compete with Ireland for foreign direct investment.
The ambition is that the new KDB will offer companies a “best in class” regime, which is at the same time acceptable under proposed new international rules. In parallel with this consultation process the Department of Finance is keeping a close eye on the outcome of the various open work streams of the OECD and the European Commission regarding existing similar tax regimes.
Among other points, the consultation is seeking specific feedback on:
- The definition of IP (the focus being on “patents and assets that are functionally equivalent to patents”). Brands/trade marks are not likely to be included as stipulated by the OECD
- Qualification for the regime (one of the key stipulations of the OECD is that IP has to be generated in the jurisdiction where the tax rate will be applied)
- Defining the nature of qualifying income and a basis for calculation
- Interplay with other domestic tax regimes, in particular R&D credits and capital allowances for IP assets
- The application of a regime to small indigenous enterprises
The consultation will run for 12 weeks from 14 January 2015 until 8 April 2015.