The UK Patents Box scheme, which came into force in April 2013, is a fiscal tool that allows companies to apply a lower rate of corporation tax to profits earned after that date from their patented inventions and certain other innovations. While responsibility for Ireland’s tax regime rests with the Minister for Finance, my Department is very conscious of the need to maintain a competitive corporate tax regime and to that end, closely monitors developments in other countries.
The development of the knowledge economy is seen as essential for generating new jobs. In particular, research and development and innovation are of vital importance in increasing economic activity both in terms of domestic business sectors and in attracting foreign direct investment. Many countries are continuing to develop fiscal policy tools to promote investment in intellectual assets. We are aware that other countries have introduced patent box schemes, including the UK. The general objective of such schemes is to provide a lower rate of tax on income derived from patents and other intellectual assets that are developed and commercially exploited by companies, generally by deducting or excluding a certain percentage of income from the tax base. It is understood that the EU Commission is currently reviewing the scheme.
In considering the merits of introducing a patent box scheme in Ireland, it is important to bear in mind that countries which have introduced such schemes have corporation tax rates that are significantly higher than our general 12.5% corporation tax rate for trading income. Alongside the 12.5% rate, Ireland provides attractive incentives to encourage R&D and the creation and exploitation of intellectual property, including a 25% tax credit for R&D expenditure. In addition, Ireland has a comprehensive capital allowances regime for expenditure on the provision of intangible assets for use in trading activities. We continue to keep Ireland’s tax offering under review to ensure that it remains competitive and effective in promoting investment in R&D, innovation and high-quality employment.
Responding to the Deputy’s reference to the Unified Patent Court, it is the case that under the international Agreement on the Unified Patent Court, London will host a central division of the court, in addition to which it is understood it will host its own local division of the Court. The nature of Ireland’s participation in the Unified Patent Court is currently a matter that is under active consideration and will be brought to Government for consideration before the Parliamentary summer recess.
