Taxes Consolidation Act 1997 section 242A

Tax treatment of certain royalties

Section 242A provides for an exemption from withholding tax on certain royalty payments made to companies resident in EU Member States or tax treaty countries, and removes the charge to Irish income tax or corporation tax on such payments for qualifying non-resident recipients.

• Royalty payments made by a company in the course of its trade or business to a company resident in a relevant territory (an EU Member State other than Ireland, or a country with which Ireland has a tax treaty) may be paid without deducting withholding tax, provided the recipient country taxes inbound royalties and the payment is made for genuine commercial reasons.
• A non-resident company receiving such qualifying royalties is also exempt from the substantive charge to Irish income tax or corporation tax on those royalties, provided it does not trade in Ireland through a branch or agency.
• Revenue operates an administrative practice allowing royalties on foreign patents to be paid to non-resident companies without deducting tax, subject to notification requirements and the retention of supporting documentation.
• The exemptions under section 242A and the administrative practice do not apply where section 817W applies to the royalty payment, or where the payment forms part of a tax avoidance arrangement.