Tax break for IP transfers is cut to 80pc
The tax break for companies transferring intellectual property assets to Ireland has been limited.
Capital allowances linked to investment in IP assets are now capped at 80pc of the income from the assets in a year. The move came into effect at midnight and is expected to raise €150m.
Finance Minister Paschal Donohoe said he took the decision in the wake of a report by the now-head of the Fiscal Advisory Council, Seamus Coffey.
"In order to ensure some smoothing of corporation tax revenues over time, the report recommended that the limitation on the quantum of relevant income against which capital allowances for intangible assets and any related interest expense may be deducted in a tax year be reduced to 80pc," Mr Donohoe said. "I intend to make this change in respect of expenditure incurred by a company on intangible assets from midnight tonight."
Mr Donohoe reiterated that the 12.5pc corporation tax rate was sacrosanct. But he also said that Mr Coffey had examined Ireland's corporate tax offering and looked at whether the receipts were sustainable.
"His advice is that the level-shift in corporation tax receipts seen in 2015 can be expected to be sustainable up to 2020," Mr Donohoe said.
In addition, the minister announced a public consultation process as part of the update on the International Tax Strategy.
KPMG said reintroduction of the 80pc cap on the deductibility of capital allowances and interest expenses on expenditure incurred on intangible assets was not surprising.
"It is welcome that the changes only apply to expenditure incurred by a company on intangible assets from midnight on Budget Day, and not retrospectively," said Anna Scally, head of technology and media at KPMG Ireland.
"It is also welcome that the full amount of the qualifying expenditure will continue to be deductible, as the cap only limits how much can be claimed in a particular year."