“Ireland as a Platform for European Expansion” Tax Considerations Adrian Crawford KPMG Tax Partner Dublin & New Y

1. “Ireland as a Platform for European Expansion” Tax Considerations Adrian Crawford KPMG Tax Partner Dublin & New York

2. Ireland – Basic Tax Attributes • Tax Rate: • 10% & 12.5% tax on manufacturing profits • 10% expired on 31 December 2010 for “pre-98 manufacturers” • 12.5% rate applies to all other trading activities • No “ruling” required to avail of 12.5% tax provided activity is “trading”. • Rulings often obtained for treasury and IP licensing activities. • 12.5% tax on certain trading dividends • 25% tax on other passive profits (e.g. interest etc) • 0% WHT on dividends paid to US controlled groups • R&D Tax credit of 25% available against all profits • Exit charges can be avoided • Stamp duty/ transfer tax but exemptions

3. Ireland as a holding company location • Recent inversions include Accenture, Covidien & Warner-Chilcott. • Participation exemption on disposal of certain shareholdings (5%, 12 months, trading, EU/DTA). • 12.5% rate on “trading dividends”: • dividends paid out of trading profits of EU/DTA resident companies, • dividends paid out of trading profits where payer is quoted or a 75% sub of quoted company, • dividends paid out of mixed profits or non-trading profits of a company where not less than 75% of that company's profits are trading and not less than 75% of the assets of the recipient and its subsidiaries are trading assets. • portfolio dividends (shareholding of 5% or less), exempt if trading receipt • Pooling of excess foreign tax credits on dividends

4. Ireland as a holding company location WHT exemption on dividends paid to EU/DTA residents Intangible asset tax depreciation regime Interest relief for investments in subsidiaries Limited thin cap rules Wide treaty network Regulated onshore regime EU Member State

5. R&D tax credit – • Further reduces effective tax rate below 12.5% • 25% tax credit on qualifying R&D spend • Available in addition to the 12.5% deduction => net subsidy of 37.5% for R&D spend • Can be used to shelter a group’s corporation tax liability or carried forward indefinitely to reduce a company’s future tax liability • “Above The Line” accounting treatment possible

6. Royalty payments • No wht on royalty payments, save certain patent royalties • Patent royalties exempt from WHT if: • the payee is a company which is neither resident in the State nor carrying on a trade in the State and is the beneficial owner of the royalty payment; • the royalty is payable in respect of a “foreign patent”, under a licence agreement executed overseas and subject to foreign law; • the payment is being made in the course of the paying company’s trade; and • the payment is not part of a back-to-back or conduit arrangement.

7. Royalty receipts • 12.5% rate if trading i.e. brand management • Withholding taxes creditable for treaty & non-treaty countries where trading • No pooling of excess withholding tax credits (yet!)

8. Interest receipts • Active treasury income taxed at 12.5% • Withholding taxes creditable for treaty & non-treaty countries where trading • Pooling of excess foreign tax credits where: • trading, • Interest is paid from treaty country, and • 25% relationship.

9. Transfer pricing • Introduced with effect from 1 January 2011 • Grandfathering for arrangements in place at 30 June 2010 • Only applies to trading activities (i.e. not to interest-free loans) • User friendly regime – can rely on existing documentation from other jurisdictions

10. “TWO TIER” IRISH STRUCTURE US Typically total effective tax rate 2.5-5% depending on pricing (assumes no repatriation to US and Sub-part F issues managed) Cost Sharing Agreement NRI NRI – Irish Registered but Non Irish Resident company, e.g. managed and controlled in the US or Bermuda IP Owner - “Super profit” taxed at 0% Profit Strip via royalties IRELAND Routine profit taxed at 12.5% EMEA profits

11. Structured Finance • Special Tax Regime – the “Section 110” company • Irish resident company engaged in the holding/management of “financial assets” • Includes shares, bonds, options, swaps and similar instruments, all types of receivables, leases, loan and lease portfolios, commercial paper, carbon credits, insurance and reinsurance contracts. • May also hold plant and machinery and carry on a leasing trade. • Must conduct business at arms’ length. • Minimum day-one value €10m.

12. Structured Finance • “Section 110” company – Tax Treatment • Deemed to be trading so expenses deductible. • Profit participating debt fully deductible, save certain anti-avoidance measures. • Treaty network can reduce/eliminate withholding taxes on income received. • No minimum profit required for tax purposes. • Wide range of domestic exemptions for withholding tax on interest. • No Stamp Duty on issue or transfer of notes issued by S.110 company.

13. Contact Details Adrian Crawford Tax Partner Phone Dublin: 353 1 4101351 Phone New York: (212) 872 7792 Email: adrian.crawford@kpmg.ie Kevin Corcoran Senior Tax Manager Phone New York: (212) 954 1334 Email: kcorcoran@kpmg.com