Brussels, 26/03/2007 (Agence Europe) - On Friday, the European Commission decided to send a reasoned opinion to Ireland requesting it to change its tax law provision by which patent royalties are tax exempt only if research leading to the patent was carried out in Ireland. The Commission believes that this provision is incompatible with the freedom of establishment and the free movement of services. Indeed, it considers that the provision dissuades Irish companies and individuals from contracting out research to institutions established elsewhere in the EU or in the European Economic Area, since the income from any resulting patents would not be exempt, contrary to the rules which apply to domestic patents. The legislation also dissuades Irish undertakings and individuals from setting up their research centres in other member states, thus infringing their freedom of establishment. The Commission's opinion is based on the EC Treaty as interpreted by the European Court of Justice in judgments of 10 March 2005 and 8 July 1999 in Cases C-39/04 ('Laboratoires Fournier SA') and C-254/97 ('Baxter and Others'). If there is no satisfactory reaction to the reasoned opinion within two months, the Commission may decide to refer the matter to the European Court of Justice. (oj)