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’. It is similar to the UK ‘patent box’, though broader in scope and with a lower rate of tax. The proposed rate is 6.25%, half of the standard rate of corporation tax, 12.5%. This is an incentive designed so that Ireland will continue to grow its 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, it 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 who 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 who decide to conduct research in Ireland, and an extended three-year relief from corporation tax or trading income for businesses beginning operations in 2015.
While the widely expected funding increase for the Office of the Data Protection Commissioner wasn’t 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.