Department of Finance publishes KDB consultation feedback

The Irish Department of Finance has published the results of its consultation into the implementation of a “Knowledge Development Box” in Ireland. One of the key issues that arose during the consultation was the definition of “qualifying assets” i.e. those intellectual property rights for which a lower corporation tax rate applies to the associated profits. This definition is controversial since the OECD has mandated that favourable tax treatment of intellectual property related profits can only apply where there is a nexus with real research and development activity.

The proposal from the Department of Finance limits the qualifying assets to patents, software copyright, supplementary protection certificates and plant breeders’ rights that result from research and development activities. Marketing related intellectual property is specifically excluded. The document states further that “The scope of patents and copyrighted software that may be included in the definition of qualifying assets is under active consideration.

The document details a possible approach as follows:

One possible approach is that the following definitions could determine what is a qualifying asset:

‘qualifying asset’ means an asset which is intellectual property, other than marketing related intellectual property, which is the result of research and development activities;

‘intellectual property, other than for the purposes of the definition of acquisition costs,’ means:

(a) a patent granted under the laws of the State or under any corresponding provisions of any territory outside the State,

(b) any copyright or related right within the meaning of the Copyright and Related Rights Act 2000, or any corresponding provision of law of any other territory outside the State, in relation to computer software,

(c) any supplementary protection certificate issued under Council Regulation (EC) No 469/2009 of 6 May 2009 (OJ L152, 16.6.2009, p 1) concerning the supplementary protection certificate for medicinal products,

(d) any supplementary protection certificate issued under Regulation (EC) No. 1610/96 of the European Parliament and of the Council of 23 July 1996 (OJ L198, 8.8.1996, p 30) concerning the creation of a supplementary protection certificate for plant protection products, or

(e) any plant breeders’ rights within the meaning of section 4 of the Plant Varieties (Proprietary Rights) Act 1980, as amended by the Plant Varieties (Proprietary Rights) Amendment Act 1998;

‘marketing related intellectual property’ includes trademarks, brands, image rights and other intellectual property used to market a qualifying asset; ‘research and development activities’ means systematic, investigation or experimental activities in a field of science or technology, being one or more of the following—

(i) experimental or theoretical work undertaken primarily to acquire new scientific or technical knowledge, with a specific practical application in view,

(ii) applied research, namely, work undertaken in order to gain scientific or technical knowledge and directed towards a specific practical application, or

(iii) experimental development, namely, work undertaken which draws on scientific or technical knowledge or practical experience for the purposes of achieving technological advancement and which is directed at producing new, or improving existing, materials, products, devices, processes, systems or services including incremental improvements thereto;

It doesn’t look like there will be any further formal consultations at this point. The Department has said that it will continue to consider the issues until the end of August at which point it presumably will begin to finalise a proposal for inclusion in October’s budget.

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