Revenue published on their website a Corporation Tax Statement of Practice: SP-CT/01/10 – 'Treatment of Certain Patent Royalties Paid to Companies Resident outside the State'.
Generally royalty payments are subject to deduction of 20% withholding tax by the payer (section 238 TCA 1997).
Chapter 6 of Part 8 TCA 1997 (sections 267G – 267M) provides that withholding tax will not apply to royalty payments to associated companies resident in another EU member State. Section 242A as inserted by section 55 Finance Act 2010, also provides that, subject to certain conditions, withholding tax will not apply to royalties paid by a company in the course of a trade or business to a company resident in a treaty country.
SP-CT/01/10 notes that Revenue are prepared to grant permission to a company paying a royalty, out of which tax would be deducted under section 238 TCA 1997 to make the payment without deducting that tax. The conditions, for this administrative practice to apply, are set out in SP-CT/01/10.
Application should be made for permission to receive the first payment due under a licence agreement without withholding tax. The steps involved and the information required in making such an application are detailed in SP – CT/01/10.