Ireland is recognised as one of the most open economies in the developed world. Notwithstanding ongoing moves towards the globalisation of corporate taxes, Ireland continues to attract foreign direct investment (FDI).
WHY SET UP IN IRELAND
Ireland’s international competitiveness is built on strong foundations, including:
- A 12.5% corporate tax rate on trading activities;
- Generous tax reliefs for technology companies, including the Research & Development (R&D) Tax Credit and the Knowledge Development Box;
- A wide network of international tax treaties, which are central to attracting FDI;
- An educated workforce, who speak English as a first language;
- A great location on the edge of Europe, and a member of the European Union.
In recent years, there has been exponential growth in the tech sector in Ireland, both from foreign companies investing in Ireland, and within the domestic economy. In this article, we explore the generous tax relief available to tech companies - the Knowledge Development Box.
From our experience, companies in the following industries are ideally suited to best avail of these reliefs and are thriving in the knowledge economy in Ireland at present:
- IT – Software and Hardware;
- Pharmaceutical & Medical Devices;
- Design & Manufacturing;
- Construction & Architecture.
KNOWLEDGE DEVELOPMENT BOX
The Knowledge Development Box (KDB) is a tax relief on income earned from qualifying assets. The relief entitles a company to reduce the rate of Corporation Tax payable on qualifying profits by up to 50%. In some cases, the Corporation Tax rate can be reduced to as low as 6.25%.
KBD was introduced with effect from January 2016, as a tax incentive comparable to other international ‘patent boxes’. To qualify, a company must have carried our research and development to create a usable qualifying asset and then must earn income from that same qualifying asset.
A qualifying asset is:
- A computer program,
- An invention protected by a qualifying patent, or
- Intellectual Property for small companies,
that is the result of R&D.
Any marketing related intellectual property such as trademarks, brands, image rights cannot be a qualifying asset. Therefore, KDB very much goes hand in hand with companies who claim the R&D tax credit on their development activities.
If your business does involve the exploitation of intellectual property, then you may have a basis to claim this relief. We would be delighted to meet with you and discuss how we can assist to maximise your benefits.
Explore Tax Relief in Ireland for Your Company
Hughes Tax & Advisory is a boutique tax practice principally serving the needs of Irish businesses and entrepreneurs. Their blend of corporate and personal experience allows their advisors to understand, address and meet the needs of both the entrepreneur and also their companies, to deliver bespoke tax solutions.
Connect with James to inquire about taxes in Ireland and how he can help ease the burden.