Like many jurisdictions, Ireland has in place numerous tax relief schemes to encourage investment by businesses and individuals. Here, we provide a summary of Ireland's key business tax relief schemes.
Film Tax Credit
Since 2015, Ireland has provided a tax credit for film producers, the value of which is based on eligible expenditure. The tax credit is 32% of either: eligible expenditure; 80% of total productions costs; or €70m, whichever is the lowest. This credit can be used against corporation tax payments. If the relief is more than the tax due, the tax authority will pay the difference.
Eligible expenditure includes payments for goods and services in Ireland, as well as employment costs.
Research & Development Tax credit
Ireland's R&D tax credit is calculated at 25% of qualifying expenditure, and this is used to reduce corporation tax.
Qualifying R&D activities involve basic or applied research, or experimental development. They must also involve systemic, investigative or experimental activities in the fields of science or technology.
Additionally, the R&D must seek to make a scientific or technological advancement and resolve scientific or technological uncertainty.
Qualifying companies must be liable to Irish corporation tax and carry out R&D in Ireland or another EEA country.
Knowledge Development Box (KDB)
Under the KDB regime, taxpayers can claim a 50% deduction on income from qualifying assets meaning such income is taxed at 6.25% – half the usual tax rate.
Qualifying assets are those created from qualifying R&D activities and include, for example, patents and computer software.
Start-up Company Relief
Known as section 486C relief, this scheme provides a deduction for start-up companies based on employee pay-related social insurance (PRSI) payments. A full deduction can be claimed by companies whose corporation tax liability is less than €40,000, with a partial deduction available if profits over €40,000 but not exceeding €60,000.
These rules permit companies to transfer certain losses to related companies within a group. In so doing, a profitable company in receipt of transferred losses can reduce its corporation tax. Under the rules, if company A transfers losses to company B, then the former must be at least 75% owned by the latter. Further, the parent company must own at least 75% of the subsidiary's shares.
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COVID-19-Related Tax Reliefs
Like vast numbers of other countries, Ireland has also temporarily provided subsidy schemes and relaxed certain tax rules to support businesses affected by the COVID-19 pandemic. These include:
The Temporary Wage Subsidy Scheme, which commenced on 26 March 2020 and enables businesses whose trade has been affected by COVID-19 to still pay employees. The scheme provides a maximum subsidy of €410 per week per eligible employee. The scheme is expected to be in place for 12 weeks.
The Tax Debt Warehousing Scheme, under which value-added tax and pay-as-you-earn tax debts which have arisen due to a company's inability to trade due to COVID-19 will be "parked" for 12 months. This applies to tax due from 1 March 2020 until the lifting of trading restrictions. No interest will be charged for the 12-month grace period. Thereafter, interest will be charged at 3% instead of 10%.