Budget 2021 introduced a change to Ireland’s taxation scheme for Intellectual Property.
Changes include an amendment to the rules for the disposals of intangible assets acquired from 14 October 2020; extension of the Knowledge Development Box (KDB) tax regime to 31 December 2022; and a planned tax credit for the digital gaming sector from January 2022.
Change to IP Tax Rules
Following budget 2021, a change was announced overnight to Ireland’s taxation scheme for intellectual property (IP)
Changes are effective from 14 October 2020.
Under the new rules, companies who move their IP out of Ireland or sell it on after holding it here for five years will face a clawback on significant capital allowances they have claimed.
Previously this clawback only kicked in if IP property was moved in under five years.
Important to note that the new rules apply only to new intellectual property assets moved to Ireland and not to IP already here.
Knowledge Box Credit Extension
The Knowledge Development Box is an intellectual property initiative that supports businesses in retaining and exploiting assets that have resulted from R&D activities in Ireland.
A company qualifying for Knowledge Development Box relief may be entitled to a deduction equal to 50% of its qualifying profits.
This means its qualifying profits may be taxed at an effective rate of 6.25%.
Qualifying activities include:
- R&D activities for computer programmes
- Patent protected inventions
- Small company patentable IP
Knowledge Development Box (KDB) tax regime has been extended for a further two years until 31 December 2022.
It was due to expire in December 2020.
Tax Credit for the Gaming Sector
Budget 2021 also included mention of the development of a tax credit for the digital gaming sector, with a view to supporting qualifying activity from January 2022 onwards.
It is planned to offer incentives to gaming studios and developers to invest in Ireland and grow the industry in a similar way to the success of the Section 481 incentives for the film and television industries.
We are here to help. Should you have any question on the content of this article or any general queries in relation to corporate tax planning, speak to Jamie O’Hanlon on 0818 303087 or email firstname.lastname@example.org to set up a call.
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