MULTINATIONALS:THE IRISH units of US and other multinationals will be able to write off the cost of acquiring intellectual property assets against taxable profits for 15 years under proposals unveiled by the Government in the Finance Bill.
The new provisions, mooted by Minister for Finance Brian Lenihan in the emergency budget last month, are designed to incentivise multinationals to boost their investment in the intellectual property deployed by their Irish operations with reliefs against the corporation tax due on their profits.
The scheme comes against the backdrop of a new plan from the Obama administration to reform the US tax code to make it more difficult for US companies to shelter their foreign profits.
“Allowances provided under the scheme will reflect the standard accounting treatment of intangible assets, and will be based on the amount charged to the profit and loss account of the company for the accounting period in respect of the amortisation or depreciation of the specified intangible asset,” said the Finance Bill memorandum. “However, companies can opt instead for a fixed write-down period of 15 years at a rate of 7 per cent per annum and 2 per cent in the final year.
“There will be no clawback of allowances where an intangible asset is disposed of more than 15 years after the beginning of the accounting period in which the asset was first provided, provided that the disposal does not result in a connected company claiming allowances in respect of capital expenditure on the asset.”
The measure was welcomed as a “far-sighted” development by the American Chamber of Commerce in Ireland business group.
“It sends a strong signal to the multinational community that the Irish Government is determined to maintain Ireland’s tax competitiveness,” said Pat Wall of accountants PricewaterhouseCoopers, the chairman of the taxation group in the chamber. “Many other jurisdictions already allow tax write-offs against intellectual property development and acquisition, and our competitive armoury has now substantially strengthened.”
Joan O’Connor, a tax partner with accountants Deloitte, said Irish subsidiary companies would secure a cash benefit from the tax relief, while their US parents would secure an accounting book benefit under US accounting rules on the consolidation of the Irish company’s results.
