Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

The disposal of a patent is regarded under general tax principles as a capital disposal. Any gain arising is subject to capital gains tax at 33%. The disposal of a patent right, for example a licence granted to use a patent, can be subject to capital gains tax. Where a capital sum is received, the net proceeds are charged to income tax under case 4, which is currently 25% for corporates or 20% to 40% for an individual, by virtue of the application of section 757 of the Taxes Consolidation Act 1997. This section was originally introduced in 1959 before the introduction of capital gains tax in Ireland to ensure that gains under the disposal of patent rights did not escape the tax net. Following the introduction of capital gains tax, the disposal of entire patents came within scope of capital gains tax, whereas the disposal of certain patent rights remains subject to case 4 income tax charges.

The proposed amendment sees all disposals of patent rights treated as capital disposals, subject to capital gains tax. While in some circumstances this could give rise to an increased Exchequer yield, the disposals would then also come within the scope of evadable capital gains tax reliefs which could then result in a reduced yield. In many cases, transfers of patent rights occur between members of corporate groups. Subject to conditions, capital gains tax legislation permits transactions to take place at a value which gives rise to no gain and no loss, for example where assets are transferred intra-group or in a restructuring. The purpose of section 22 of the Bill is to ensure there is clarity on the application and operation of tax provisions for both patents and patent rights. It is not expected to give rise to either an Exchequer cost or yield. Therefore, I cannot accept the proposed amendment from the Deputy.