Derek Nolan (Galway West, Labour)
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123. To ask the Minister for Finance the tax regime applicable to corporate patent royalty income; his evaluation of its effectiveness; and if he will make a statement on the matter. [27116/15]

Michael Noonan (Limerick City, Fine Gael)
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I am advised by the Revenue Commissioners that there is currently no specific tax regime applicable to corporate patent royalty income. Patent royalty income received by a company in the course of carrying on a trade is chargeable to corporation tax at 12.5% (and at 25% if it is received in a non-trading context).

However, in Budget 2015, I introduced a new Road Map for Ireland's Tax Competitiveness which set out a comprehensive package of measures designed to reposition Ireland to reap the benefits of sustainable foreign direct investment in a changing international tax landscape.

One of the measures announced in the Road Map was a new Knowledge Development Box ('KDB'), which will provide a reduced effective rate of charge on patent royalty income to the extent that it has been created by research and development carried out in Ireland.

I view the Knowledge Development Box as a positive measure for Ireland. It is recognised internationally that investment and growth in OECD economies is increasingly driven by knowledge-based investment, which is related to research and development and intellectual property. Putting in place an attractive tax offering for developing and commercially exploiting intellectual property is therefore important to encourage companies to develop their knowledge-based capital in Ireland, and for our continued success in attracting foreign direct investment into Ireland.

A public consultation to gather views on how the KDB should operate was launched on 14th January and closed on the 8th April. The consultation paper invited submissions from interested parties on their views of how the KDB should be designed to ensure that it meets the key objective of being the most competitive in class, within the agreed international parameters for fair tax competition in this area. This consultation went well with active engagement from stakeholders my officials met with a number of parties throughout this time and nearly 40 written submissions were received.

At the same time, Irish officials have continued to engage with the OECD on the internationally agreed parameters that will confirm what acceptable tax competition for this area, and what may be viewed as an acceptable KDB regime. These discussions have been on-going at the OECD Forum on Harmful Tax Practices and a consensus on the topic is expected very shortly.

All of the above will feed into the overall design of the KDB which is being finalised over this summer and will be legislated for in Finance Bill 2015.