Tax incentives

Knowledge Development Box (KDB)

KDB is a benefit under Irish corporation tax law.

The benefit applies to income from qualifying patents, computer programs and, for smaller companies, certain registered intellectual property (IP) rights.

The benefit is available for the first time for a financial year starting on 1 January 2016. If a corporation qualifies, 50% of the qualifying profit can be treated as tax deductible. Thus, a qualifying profit is effectively taxed at 6.25%.

How does a company qualify as a KDB?

A corporation qualifies as a KDB if it creates a usable qualifying asset through qualifying research and development (R&D) with which it generates income.

What is a qualifying asset?

A qualifying asset is created through R&D activities, such as

• Computer programs

• An invention protected by a qualifying patent

• IP of small businesses, which is confirmed as patentable by the Controller of Patents, but is not patented

Research and Development (R&D) Tax Credit

If a corporation has expenditures for research and development (R&D), these activities may qualify for R&D tax relief. The benefit consists of 25% of the qualifying expenses and reduces the corporate tax base.

A corporation qualifies for an R&D tax credit if:

• it is liable to corporation tax in Ireland

• it carries out qualifying R&D activities in Ireland or the European Economic Area (EEA)

• the expenses do not qualify for tax relief in another country

What is qualifying R&D activities?

To qualify for an R&D tax credit, a corporation must carry out R&D activities that meet the following conditions. The R&D activities must:

• involve investigative, exploratory or experimental activities

• be in the field of science and technology

• comprise one or more of the following categories of R&D:
  • Basic research
  • Applied research
  • Experimental Research

• seek to make scientific or technological progress

• involve the resolution of scientific or technological uncertainty

Intellectual Property (IP) Regime (Intellectual Property)

Irish trading companies that acquire qualifying intellectual property may amortise it at the same rate under the accounting rules, alternatively over 15 years. Own-used software rights can be amortised over 8 years. Up to 80% of the depreciation can be applied against income from intangible assets that are already being exploited. Unused deduction amounts can be carried forward to later years with IP profits.

Section 110 Companies

For a company that invests € 10 million as initial investment in qualifying assets, the corporate tax rate is set at 0%. The company must be resident in Ireland and be managed from there, the business must be solely to hold and manage qualifying assets and the pricing of all transactions must be arm’s length.

The Company may invest in financial assets, commodities and machinery and equipment (tangible assets). The term “financial assets” is broad and includes common financial assets such as shares, loans, leasing and ground rent including portfolios thereof, bonds, debentures, debt rights and derivatives as well as assets and rights (trading) in gas emissions such as carbon dioxide (see Emissions Trading such as EU Greenhouse Gas Emission Allowance Trading Scheme).

Special Asignee Relief Programme (SARP)

If you come to Ireland as a higher earning employee up to and including the 2020 tax year, you can apply for the following tax relief:

• 30% of the portion of your annual salary in excess of €75,000 is tax free.

• Private school fees are tax deductible up to €5,000 per year.

The conditions for this relief are:

• You come to Ireland up to and including tax year 2020 on your employer’s sending work for him/her in Ireland (note that this employer may be your own company with e.g. parent or subsidiary in Ireland)

• You have previously worked for your employer outside Ireland for at least 6 months

• You stay for at least 12 months

• You were not liable for tax in Ireland in the previous 5 years

• You are liable for tax in Ireland for all years in which you take advantage of the relief

• Your minimum annual basic salary is € 75,000 (excluding bonuses, premiums etc.)

Tax exemption from employer’s contribution to social security

Companies with an annual Irish corporation tax liability of up to €40,000 are exempt from employer’s social security contributions for three years.  

Public grants

You can get an overview of these at: https://www.localenterprise.ie/Discover-Business-Supports/Supporting-SMEs-Online-Tool

and at: https://www.thinkbusiness.ie/articles/business-grants-ireland/
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