New tax laws are allowing Irish-based companies to pay an effective corporation tax rate of as little as 2.5% as they locate their intellectual property assets in Ireland.

The 2.5% rate could effectively be reduced to zero if the company makes use of the newly improved research and development (R&D) tax-credit regime, it has emerged.

Despite recent commentary about President Barack Obama's crackdown on overseas low-tax jurisdictions, US firms are among those who are managing to hugely reduce their tax bills, if they are involved in research activities. Intellectual property is one of the most significant intangible assets on the books of major companies and can take the form of patents, design rights, inventions, trademarks, brand names, domain names, publishing rights and copyright.

The new tax laws came about as a result of a significant amount of lobbying of government by groups such as the American Chamber of Commerce, the Irish Taxation Institute and the Institute of Chartered Accountants.

Even though the ink on new intellectual property laws is barely dry, there are a number of multinational groups already considering moving their intellectual property to Ireland, Peter Vale, a tax director at Grant Thornton told the Sunday Tribune.

The new tax relief is structured so that only companies using the intellectual property for "trading" purposes will benefit from the tax deductions. However in the case of intellectual property, "trading" can be achieved by simply having suitably qualified employees carrying out the activity in Ireland.

"What this means for Ireland Inc is that the transfer of intellectual property will not be merely 'paper-based' but will involve the location of high-calibre business executives in Ireland. The influx of these professionals will likely result in the creation of teams of individuals dedicated to servicing the group's intellectual property," said Vale.

An incentive to encourage more companies to locate jobs in Ireland came when the research and development tax credit was first introduced in 2003. However it did not allow companies with Irish operations to set off their tax credit against payroll taxes.

"This left companies that had no corporate-tax liability without any tax incentive to invest in research and development in their Irish operations. This issue has been resolved as of January 2009 and companies now have the ability to offset research and development costs against payroll tax liabilities," explained Vale.