IP companies pay little taxes?

OU812

Heard recently that companies which own IP patents or otherwise pay very little taxes in Ireland & generally "lease" the IP to a secondary company who pay over the odds for its use resulting in a taxation loophole.

Is this true?

kneemos

Do bears crap in the woods?

Tiddlypeeps

What do you mean by companies who own IP patents?

Some people will patent something they created and will then lease that patent to others to use because they don't have the means or expertise to do it themselves but they have to pay tax on the profits from this, and the person who leases the patent will have to pay taxes on the sale of the end product etc etc.

I'm not sure what loop hole is being used in this scenario tho as everyone that makes money pays tax on it, unless they are illegaly avoiding taxes.

Beasty

OP could you please explain why yopu consider it a tax loophole? Provided OECD guidelines are being applied and arm's length prices are being charged, this is entirely in line with international tax rules. Indeed any other arrangements may actually contravene the rules established by all major nations many years ago, and could then constitute tax avoidance or even evasion

Alan Shore

Have a look at this and see

http://en.m.wikipedia.org/wiki/Double_Irish_arrangement

OU812

I'm not sure of the exact arrangements. It was just said to me that the company owning the patent pays less taxes than the company developing the product/service.

So if for example, I create an app that becomes the next "Candy Crush"... I register a company and that company owns the patents/rights to it.

I can them form a second company to exploit the app & that company markets & sells it. This company earns €1 per copy sold.

Company 2 then pays company 1 90% of the profit as a leading fee leaving company 2 only 10% to operate on & pay taxes on.

Company 1 then pays less taxes because they don't manufacture anything, only own the rights.

Not sure if I'm explaining it correctly.

Sir Osis of Liver.

Does the pope sh1t in the woods?

kneemos

Sir Osis of Liver. wrote: »

Does the pope sh1t in the woods?

Only when he wears a cap.

astrofool

OU812 wrote: »

I'm not sure of the exact arrangements. It was just said to me that the company owning the patent pays less taxes than the company developing the product/service.

So if for example, I create an app that becomes the next "Candy Crush"... I register a company and that company owns the patents/rights to it.

I can them form a second company to exploit the app & that company markets & sells it. This company earns €1 per copy sold.

Company 2 then pays company 1 90% of the profit as a leading fee leaving company 2 only 10% to operate on & pay taxes on.

Company 1 then pays less taxes because they don't manufacture anything, only own the rights.

Not sure if I'm explaining it correctly.

Company 1 will usually be setup in a low/zero tax region, usually a commonwealth country or British dominion that the international community is afraid to go after, but will instead pretend that Ireland's 12.5% rate is the problem.

The countries setup and support this system, they just need to be seen to be against as a vote getting exercise (rather than change the law to stop it...).

Gummy Panda

Sir Osis of Liver. wrote: »

Does the pope sh1t in the woods?

I occasionally see him in the woods when I'm crapping there