IRELAND Law and Practice Contributed by: Andrew Quinn, David Burke, William Fogarty and Lynn Cramer, Maples Group
Knowledge Development Box Ireland has an OECD-compliant “knowledge develop - ment box” for the taxation of certain intellectual prop - erty. The amount of expenditure incurred by a com - pany in developing, creating or improving qualifying patents or computer programs (“qualifying expendi - ture”) is divided by the overall expenditure on such assets before being multiplied by the profits arising from such assets (eg, from royalties and net sales). The result is effectively taxed at 10%. A potential 30% uplift in the qualifying expenditure is available, capped at the total amount of acquisition costs and group outsourcing costs. Capital Allowances on Provision or Acquisition of Intangible Assets Capital allowances (tax depreciation) are available for companies incurring capital expenditure on the provi - sion of intangible assets for the purposes of a trade. The relief applies to a broad range of intangible assets (eg, patents, copyright, trade marks, know-how) that are recognised as such under generally accepted accounting practice, and are listed as “specified intan - gible assets” in the Irish tax legislation. The relief is granted as a capital allowance for set-off against prof - its arising from the use of the intangible assets. The write-off is available in line with the depreciation or amortisation charge in the accounts or, alternatively, a company can elect to take the write-off against its taxable income over a 15-year period. Where the intangible asset was acquired prior to 14 October 2020 and is held for more than five years, there is no claw-back of the allowances on a dispos - al to an unconnected buyer. If an intangible asset is acquired on or after 14 October 2020, a claw-back or “balancing charge” will arise on the disposal of that asset if the sales proceeds are in excess of the “tax written down value” of the asset. The allowance can be surrendered by way of group relief or carried for - ward if unused. Digital Gaming Tax Credit In 2022, Ireland introduced a tax credit for the digital gaming sector, which operates as a refundable cor - poration tax credit for qualifying expenditure incurred in the design and development of digital games. The tax credit is available at a rate of 32% of qualifying
expenditure, with a maximum limit of EUR25 million per project. A per project minimum spend requirement of EUR100,000 applies. This credit was extended to 31 December 2031 and has been expanded to include qualifying post-release content for up to three years post-launch subject to EU approval. 2.3 Special Incentives Certain reliefs and incentives may apply for compa - nies involved in shipping, financial services, property development, forestry, farming, film production and mining businesses. 2.4 Loss Relief Ireland distinguishes between losses arising from trading income and losses arising from non-trading income. Trading losses are computed in the same manner as trading profits. Trading losses may be off - set against non-trading profits, but are adjusted on a “value basis” so that they do not reduce the non- trading income more than they would have reduced the trading income. Broadly, the following actions apply to trading losses, in the following order: • trading losses can be set off against other prof - its of the company (before charges) in the same accounting period; • trading losses can be set off against profits (before charges) of the previous accounting period of cor - responding length, if the company carried on the trade in that period; • trading losses of one Irish company (or of an Irish branch of an EU company) can be set off against the profits of an Irish resident company or Irish branch of an EU company in the same corporate group as the company that has excess trading losses; and • trading losses can be carried forward on an indefi - nite basis and set off against future profits derived from the same trade. Capital losses are ring-fenced and can only reduce capital gains.
234 CHAMBERS.COM
Powered by FlippingBook