The Irish Revenue issued a Tax Statement of Practice at the end of July (SP-CT/01/10), removing withholding taxes from patent royalties paid to associated companies in another EU member state.
Ireland already exempts non-patent royalties from withholding tax where paid to a company in a treaty country (and also exempts patent royalties paid to associated EU companies); however, patent royalty payments have generally been subject to deduction of 20% withholding tax by the payer.
The new Statement of Practice notes that Revenue are prepared to grant permission to a company paying a royalty, from which tax would normally have to be withheld, to make the payment without deducting that tax. There are, of course, conditions attached before permission will be granted:
1. the royalty must be paid in respect of a foreign patent;
2. the relevant licence must executed outside Ireland and be governed by foreign law;
3. the Irish payer must pay the royalty in the course of its trade;
4. the royalty must not be part of arrangements which involve the Irish payer acting as a flow-through entity;
5. the payee must not be not resident in Ireland and must not carry on a trade in Ireland through a branch or agency; and
6. the payee must be the beneficial owner of the royalty payment.
Finally, there is a catch-all clause that says permission will only be granted and remain valid if the royalties are paid “in good faith and for purposes that do not include tax avoidance”.
(The picture is Abraham Lincoln – a portrait from the Library of Congress – the only US president to own a patent, albeit he’s a bit late to get royalties on it …)--
Related posts:
- Ireland: RIP Patent tax exemption
- Malta: new patent royalty exemption
- India: satellite use fees are royalties
- France/USA: treaty withholding on IP royalties to be abolished
- Ireland: Finance Bill provisions on capital allowances for intangibles
Tags: ireland, patent, royalty, withholding tax