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Budget 2016 & the Tech Sector

October 28, 2015


On 13 October 2015, Ireland’s Minister for Finance introduced the budget for 2016. The emphasis and commitment of the Government to innovation and R&D is evident and has resulted in the introduction of a Knowledge Development Box (KDB) and a €1.2m increase in funding for the office of the Data Protection Commissioner (DPC) bringing its total funding to over €4.7m.

Knowledge Development Box

The Department of Finance has confirmed that the KDB will be OECD-compliant. The KDB aims to nurture Ireland’s popularity as an IP location by providing a 6.25% effective corporation tax rate on certain profits arising from R&D carried out by an Irish company and based on corresponding patents, plant breeders’ rights or copyrighted software procured by that company.

Other than these rights, the scope of assets qualifying for the regime includes a category for SMEs called “intellectual property for small companies”. These assets should be “inventions that are certified by the Controller of Patents, Designs and Trade Marks as being novel, non-obvious and useful”. This measure is available to companies with a global turnover of less than €50m and who derive income of less than €7.5m annually from those IP assets. This measure is not yet in effect and can only come into effect by order of the Minister for Finance. It will be interesting to see how this new relief is applied in practice and how the Irish Patents Office (IPO) will implement this new certification process.  We understand that no guidance has been issued to the IPO regarding the operation of this certification process. 

Increase of €1.2m in funding for the Data Protection Commissioner

This significant increase in funding for the DPC begins to recognise the importance and role played by the DPC in Ireland in regulating the ever-growing range of indigenous and international digital companies located here.  Speaking about last year’s increase in funding for her Office, the DPC said “The next few years will be extremely challenging for data protection regulators across Europe as we prepare for pan-European cooperation under a proposed new General Data Protection Regulation. It is critical that the Office is fully equipped to play its part in regulating cross-border data flows and ensuring the fundamental right to data protection of all European data subjects is upheld.”

The practical implementation of the KDB and, in particular, the SME qualifying mechanism for “intellectual property for small companies” is a new concept and an interesting one to follow.

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Contributed by: Leo Moore & Brian McElligott