| | | | | | | | | | | Intangible Assets - Intellectual Property (IP)
– Tax Relief | | | The Finance Act 2009 introduced tax relief for capital expenditure incurred by companies on a broad range of Intangible Assets. The new provision is effective for expenditure incurred after 7th May 2009.
The range of assets qualifying for relief is extensive and includes brands, trademarks, copyrights, publishing rights and patents.
A full list of the intangible assets qualifying for relief is set out in below. | | | | Specified intangible assets: | | |  | Any patent, registered design, design right or invention. |
| | Any trade mark, trade name, trade dress, brand, brand name, domain name, service mark or publishing title. |
| | Any copyright or related right within the meaning of the Copyright and Related Rights Act 2000. |
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| | Certain supplementary protection certificates for medicinal products. |
| | Certain supplementary protection certificates for plant protection products. |
| | Certain plant breeders’ rights. |
| | Know-how, generally related to manufacturing or processing. |
| | Any authorisation required in order to sell a medicine or product of any design, formula, process or invention for the purpose it was intended. |
| | Any rights derived from research, prior to authorisation, on the effects or items covered directly above. |
| | Any licences in respect of an intangible asset referred to above. |
| | Any ‘non-Irish’ rights similar to those outlined above. |
| | Goodwill to the extent that it is directly attributable to the items set out above. |
| | | | How it works: | | | Companies carrying on a trade will be entitled to claim a tax write-off for the capital cost of acquiring or developing qualifying intangible assets. For the purpose of the relief, qualifying intangible assets will be referred to as specified intangible assets.
Where a specific intangible asset is amortised or depreciated for accounting purposes, the tax write off will be available in line with the accounting write-off.
Where a specified intangible asset is not amortised or depreciated for accounting purposes, or indeed has a very long life, a company can elect to take the tax write-off over a 15 year period. Here a rate of 7% will apply for years 1 to 14 and 2% for year 15.
Where a specified intangible asset, is held for more than 15 years, there will be no claw back of the tax relief granted on its disposal unless it is sold to a connected company who wishes to claim allowances under the new provision. | | | Relief is available under the new provision where the intangible is purchased from a third party or a foreign affiliate. It is also available in respect of acquisitions from Irish related parties, although further conditions may apply in these cases. Specifically, if the intangible is acquired from a related company or in the course of a restructuring or amalgamation, it may be necessary to elect out of certain Irish Capital Gains Tax (CGT) reliefs in order for the acquiring company to be eligible to claim the relief.
In relation to in-house development, while Revenue expenditure would generally have been deductible for tax purposes, prior to the introduction of the new provision, it would have been difficult to secure a deduction for capital spend. Capital expenditure incurred by a company on the in-house development of specified intangible assets should now also qualify for tax relief.
Companies managing, developing or exploiting intangibles qualifying for the relief will be required to segregate those activities for tax purposes. Companies selling goods or services will also be required to segregate those activities for tax purposes where the greater part of the value of those goods and services derives from specified intangible assets qualifying for relief.
The principal restriction is that relief for capital allowances and certain interest costs is restricted to 80% of the related annual income before capital allowances and interest. The restriction applies to each accounting period and unused allowances or interest in any period can be carried forward and used in future accounting periods.
A restriction can also apply to the amount of interest which can be deducted by a holding company which as financed a subsidiary company which acquires an intangible asset qualifying for relief. The amount of interest deductible in the holding company is restricted to the interest deduction that would have been available in its subsidiary had the subsidiary financed the acquisition itself. The allowable interest deduction can be further increased by interest and certain dividends received from the subsidiary.
Other caveats and restrictions may also apply. For example, relief will not apply where the capital expenditure is not incurred by the company wholly or mainly for bona fide commercial purposes or where the capital expenditure incurred exceeds an arms length amount.
| | | | Other Matters | | | In tandem with the introduction of the new provision, existing reliefs for expenditure on patents and know-how will be phased out for companies. Where relevant, the existing provision in relation to software will continue to apply. This relief affords a tax write off for capital expenditure on software or software rights, broadly over an 8 year period.
It is also helpful to note that no Irish stamp duty liability should arise on the transfer of assets qualifying for the relief. | | | | | | If you require more information in relation to this matter please email or call us on +353 1 6120580 today. | | | | | | |
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