Ireland's position as a world-leading base for pharmaceutical and medical devices companies is fuelling new investment and creating new opportunities for manufacturing ventures.
A recent example is Smithstown Light Engineering, based in Shannon. Established in 1974, the Irish precision engineering firm, which makes medical and orthopaedic devices, is experiencing rapid growth. The firm announced this month that it will create 60 new positions over the next two years by expanding its second production facility with an investment of €6m. This will amount to a doubling of its headcount in the past four years.
Other examples of pharmaceutical companies thriving in Ireland at present include Chanelle Pharma, which was named as Ireland’s Multinational Exporter of the Year at the Export Industry Awards in December 2019, and Dublin-based Open Orphan, which has recently secured a new three-year deal with an as yet unnamed German pharmaceutical company. Open Orphan stated that the contract “guarantees significant annual revenue with work under the contract to commence this month [January 2020]”.
Ireland is home to the 10 largest pharmaceutical companies in the world, and more than 75 pharmaceutical companies have chosen Ireland as their base. These companies have committed about $10bn in investment in Ireland in the past decade.
These firms benefit from Ireland's 12.5% corporate income tax rate, Ireland's highly educated workforce, and the country's geographic advantages, being in Europe and the European Union and being just a stone's throw from the US market.
Knowledge Development Box
A key incentive behind Ireland’s pharmaceuticals boom is Ireland’s attractive preferential tax regime – the Knowledge Development Box (KBD) – for income derived from intangible assets developed as a result of research and development (R&D) activities undertaken in Ireland.
An eligible company can claim a deduction equal to 50% of its qualifying profits. This means that, in effect, these profits are taxed at 6.25% – half Ireland's headline corporate tax rate of 12.5%.
In order to qualify, the R&D work must involve scientific enquiry and attempt a technological advancement or resolution of uncertainty in a scientific field and must include basic, applied, or experimental research. Other basic qualifying criteria include that the company must carry out its R&D activity in Ireland or another European Economic Area member state, must pay Irish corporation tax, and that the qualifying expenditure must not qualify for a tax deduction in any country other than Ireland.
The KDB covers income that arises from patents, copyrighted software, and, in the case of smaller companies, other intellectual property that is similar to an invention that could be patented. That said, there is no requirement for the company claiming the R&D tax credit to hold the intellectual property rights to the results of the R&D work, and there is no requirement for the R&D work to be successful.
WHY SMART MBS?
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