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Budget 2015: Technology and Incentive Schemes

November 7, 2014

Ireland’s Budget for 2015 struck a cautiously optimistic note and announced an enhanced intellectual property (IP) regime for companies with Irish operations.

The “Knowledge Development Box”

The centrepiece of the budget is the introduction of a “Knowledge Development Box”. This scheme is similar to the UK “patent box”, though broader in scope and with a lower rate of tax. The proposed rate is 6.25%, which is half of the standard rate of corporation tax of 12.5%. This is an incentive designed to continue growth in Ireland’s technology cluster and attract even more high value projects from global companies committed to investing in technology.

Such schemes are currently being reviewed by the EU and OECD and, subject to the exact outcome of this review, the Knowledge Development Box scheme will be legislated for in the 2015 Finance Bill. The Government plans to commence the scheme in 2016.

Double Irish tax break to be phased out

This tax planning arrangement, which allows corporations with Irish operations to make royalty payments for IP to a separate Irish-registered subsidiary in a highly tax-beneficial manner, will be phased out from 1 January 2015. From that date, all companies registered in Ireland must also be tax-resident here.

A transitional period will apply until 2020 for companies that have implemented the structure before 1 January 2015.

Research and development tax credit and relief for start-ups

Notable improvements have also been made to the R&D tax credit and the specified intangible asset regime.

Two new schemes in particular are likely to incentivise the already thriving Irish start-up community: the new corporate tax credit of 25% for companies that decide to conduct research in Ireland, and an extended three-year relief from corporation tax or trading income for businesses beginning operations in 2015.

Data protection

While the widely expected funding increase for the Office of the Data Protection Commissioner was not definitively delivered, in a very positive development, the Department of the Taoiseach has been allocated an additional €15 million in current expenditure, some of which is expected to provide funding for additional responsibilities in the area of data protection.

Contributed by David Cullen.

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