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Ireland Closes One Loophole for U.S. Companies, Opens Another

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By Jonathan R. Tung, Esq. on November 19, 2015 12:00 PM

It looks like Ireland's recent closing of a popular tax-loophole that drew mega-corporations to Irish shores like flies to a honey-pot isn't entirely what it first seemed.

Chris O'Leary, lord mayor of the quiet town of Cork, isn't keen on seeing American companies leave in the wake of the closing of Irish tax-loopholes, but he maintains confident that "companies aren't just coming for the corporate tax rate." But a recent push to sweeten the deal for patent-heavy industries is nice to have as insurance.

The Double Irish

There's been a bit of political backlash from progressive and the hoi polloi about Ireland's infamous "Double Irish," which has allowed companies like Google, IBM, and Apple to escape paying taxes. And it's not just the little people who are hopping mad: The European Commission is currently investigating whether or not Ireland colluded with Apple to arrange a sweetheart deal that helped the smartphone maker circumvent the local aid rules. How the loophole works is a great case study in how to be a One-Percenter. We always love flow charts: Courtesy of the NY Times, a picture is worth a thousand words.

Let's Keep 'Em Here

Ireland likes large American corporations coming in to help push down local unemployment rates. And so, the country announced last month that if it couldn't have the Double Irish, it would instead tax revenue generated by patents and other IP registered in Ireland at only a rate of only 6.25 percent. If you're a multinational company with patents in the pipeline, your eyebrows are raised right now.

Let's All Calm Down, People

There are catches, of course. Under international law, the tax benefit would only be available to companies that did the bulk of the research for the IP and patents within the borders of the country.

So, the new rate isn't a loophole, per se, but a bold and unvarnished statement to companies to "come on over, just know the limits." That means that these large companies will have to ship over talent to Ireland before they can even breathe on that 6.25 percent rate. But there doesn't appear to be an exodus out of the country. Recently, IBM, Pfeizer and Apple all announced recently that they intend to increase their operations in Cork. It looks like things are looking bright for Ireland.

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