Ireland sees latest corporate tax measure as slow burner

By Padraic Halpin DUBLIN (Reuters) - Ireland's finance minister said his latest corporate tax measure aimed at multinational firms will prove gradually attractive but analysts said the take-up of the new "knowledge development box" could be very limited. Ireland on Tuesday introduced a reduced tax rate of 6.25 percent - half Ireland's already low headline rate levied on businesses - to apply to certain intellectual property holdings (IP) under the new patent-based tax regime. However after his department had already flagged that new guidelines set down by the Organisation of Economic Cooperation and Development (OECD) had left Ireland no flexibility in the design, finance minister Michael Noonan said it would be a slow burner. "It will principally be attractive in the first year or two years to indigenous companies but then it will act as a magnet for foreign direct investment companies to engage in research and development (R&D) as well, some will dip into that area," Noonan told a news conference. "We're bound by the rules set out by the OECD and they're not very elastic but we will push it to the margins." Those limitations mean the relief will only apply to patents rather than other potential assets like "know how" and "trade secrets", requires substantially all of a company's R&D to be undertaken in Ireland and will not apply to IP that can be purchased by a part of the company already in Ireland. "The Knowledge Development Box (KDB), which has been a year in the making, is the cake that will never be eaten," said Paraic Burke a tax partner at accountancy firm PwC, referring to its planned introduction a year ago when Ireland agreed to phase out the much-criticised "Double Irish" loophole. "The requirement to follow the strict rules set out by the OECD for these 'patent box' regimes means that the KDB will have little impact in the FDI or domestic market. The uptake on this is likely to be very limited." Noonan added that Ireland would have an advantage over other countries like Britain and the Netherlands which, under the OECD rules, will have to amend existing regimes giving favourable tax treatment to profits from products derived from patents. "We think in the short to medium term, smaller, pre-IPO multinationals will be interested and we're having conversations where they are nimble enough and open to having any resulting IP owned by the Irish R&D company," said Kevin Doyle, international tax partner at BDO. (Additional reporting by Conor Humphries; Editing by Pravin Char and James Dalgleish)

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