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For more than 50 years successive Irish governments have used targeted fiscal measures to attract and retain international investment in Ireland. It is clear from Budget 2004, which was approved by the Irish parliament on December 3 2003, that this strategy continues to be the cornerstone of Irish government policy in relation to foreign direct investment.

Citing the "intensifying competition for international investment and the jobs that go with that" and reaffirming the Irish government's commitment to "targeted [fiscal] reliefs that can produce economic benefits", the Irish Minister for Finance announced the following measures specifically focused on making it more attractive for the international business community to do business in and/or through Ireland.

Headquarters and holding company regime

The introduction of a new Headquarters And Holding Company Regime will exempt Irish resident companies from capital gains tax on the disposal of a substantial shareholding in their trading subsidiaries. Related provisions will also be introduced concerning the provisions on double taxation relief in the case of dividends paid to parent companies. The new Headquarters and Holding Company Regime will apply to relevant disposals of subsidiaries in the EU or in countries with which Ireland has a tax treaty on or after the date of publication of the Finance Bill 2004 (February 2004). A complete list of Ireland's double tax treaty partners can be seen at

Stamp duty exemption on intellectual property

Stamp duty (that is, a documentary tax which is, for the most part, imposed on transfers of property) is to be disapplied in respect of transfers of intellectual property such as copyright, patents and trademarks.

Research and development tax credit

The government will introduce a 20% tax credit for qualifying incremental expenditure on research and development (R&D). The tax credit will be available to companies subject to Irish corporation tax in respect of in-house qualifying R&D undertaken within the European Economic Area (that is, the EU, Norway, Switzerland, Iceland and Liechtenstein). It will apply to expenditure that is deductible for Irish tax purposes. In the case of Irish resident companies the relief will only be available if expenditure is not tax deductible in any other territory.

The tax credit will be allowed against a company's corporation tax liability for the year it is incurred with the unused balance available to carry forward against the corporation tax liability of the company until it is used up.

The new relief is subject to clearance by the European Commission from a state aid perspective and will come into operation subject to and following that clearance.

No transfer pricing

It is also noteworthy that no reference was made by the minister for finance in his budget speech concerning the introduction of transfer pricing rules or even a consultation process to discuss the introduction of such rules. Irish tax law contains no specific codes of rules in relation to transfer pricing, thin capitalization or controlled foreign corporations.

Liam Quirke

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