Intellectual Property allowances rules to be tightened but Knowledge Development Box extension and ongoing commitment to 12.5% Corporate Tax welcomed has been saved
Intellectual Property allowances rules to be tightened but Knowledge Development Box extension and ongoing commitment to 12.5% Corporate Tax welcomed
Commenting on the extension of the Knowledge Development Box, Karen Frawley (tax partner in Deloitte) noted:
We have previously highlighted the need for Budget 2021 to support jobs and investment to allow the economy to recover in the months and years ahead. We therefore welcome the extension of the Knowledge Development Box for a further two years to the end of December 2022. The Knowledge Development Box is the first OECD compliant Intellectual Property regime that supports businesses in retaining and exploiting qualifying assets, and will likely play a key role in further developing the knowledge economy as we move into a post COVID-19 world. While the uptake of the KDB since its introduction has been limited, we would nevertheless welcome the extension of the relief in part to give companies a greater opportunity to consider its usefulness and also in gathering data and feedback on the scheme for future consultation.
In response to the planned amendments to the intellectual property capital allowances regime, Frawley said:
The Minister for Finance in his speech confirmed that with effect from today, existing rules which provide tax relief on the acquisition of qualifying intellectual property will be amended. As such, disposals of such assets will be subject to a balancing adjustment to effectively claw back relief previously given where the proceeds received exceed the tax written down value. Such a move would align the IP allowance regime with other forms of relief for capital assets. While the impact of such an amendment should not stand as a barrier to companies carrying on activities associated with the effective management of intellectual property, it does represent a tightening of the rules in comparison to previous years. Nevertheless, Ireland remains a competitive location for the carrying on of activities in connection with intellectual property and will likely continue to be able to compete on the world stage for foreign direct investment.
Frawley also welcomed the Minister’s ongoing commitment to the 12.5% rate of corporate tax:
This provides a much needed measure of certainty and clarity to businesses at this time. At the same time, we recognise that as outlined by the Minister, tax reform is inevitable. While corporation tax receipts of €7.5billion have played a central role in funding pandemic related expenditure, the Ministers speech outlined the constant need for reform in the face of global changes to the corporate tax landscape. The announcement of an update to the Corporation Tax Roadmap in the coming weeks and months is very welcome as it should serve to give taxpayers greater insight into the changes expected in the medium to long term.
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