Tax policy changes for companies due in budget

The Government is to propose a significant new tax policy related to companies’ intellectual property as part of tomorrow’s budget.

The move is a bid to try to reassure international investors, as the budget will also announce the ending of the controversial "double Irish" tax structure, following significant international pressure on Ireland.

Minister for Finance Michael Noonan will propose that under a new regime companies can put earnings coming from the exploitation and patenting of intellectual property (IP) into a separate "box", which would attract a lower tax rate. However these so-called patent box structures are themselves controversial, so Mr Noonan is expected to indicate he would seek EU approval for the move, likely to delay its introduction for at least a year. It would be billed as a move to attract high-value research to Ireland.

The double Irish is expected to end for new investors from next January. Multinationals here who use the structure will be given time to phase it out – thought likely to be four years. The double Irish helps big multinationals to channel profits earned outside the US through Ireland and out to tax havens, allowing multinationals to incorporate a company here but have it tax resident elsewhere. This is the loophole the budget will close off, ruling that all companies incorporated here must pay tax here too, unless allowed to do so otherwise by double tax arrangements.

Mr Noonan will announce measures along with the abolition of the double Irish. The centre-point to this will be the patent box, which would allow companies to pay a lower tax on the exploitation of the research and development of products and services located in Ireland.