Ireland: Recent developments in Ireland’s R&D tax credit regime

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Ireland: Recent developments in Ireland’s R&D tax credit regime

duffy.jpg

bailey.jpg

Joe Duffy


Tomás Bailey

Earlier this year, the Irish Revenue Commissioners (Revenue) published updated guidelines on Ireland's research and development (R&D) tax credit regime (the Guidelines). The Guidelines follow recent legislative amendments which expand Ireland's tax incentives for R&D activities and further enhance Ireland's attractiveness as a location for developing intellectual property. Under Irish tax law, a company can claim a tax credit of 25% of qualifying expenditure, in addition to the standard corporation tax deduction, in respect of certain expenditure incurred in carrying out R&D activities across a broad range of sectors. The tax credit is available to offset against a company's Irish corporation tax liability. Excess credits may be carried forward for offset against future profits or may be repaid to the taxpayer in certain circumstances.

Recent enhancements

The Finance Act 2014 introduced changes to improve the tax credit available for expenditure incurred by companies on R&D activities. Of particular note is the change to a volume-based regime. Previously, the tax credit available for qualifying R&D expenditure was only available on an incremental basis. The credit was limited to the amount by which expenditure on R&D exceeded the expenditure incurred in 2003 (the designated base year). Although the base year threshold had been incrementally eroded in recent years, its complete removal means that the R&D tax credit can now be claimed in respect of all qualifying expenditure incurred in accounting periods commencing on or after January 1 2015.

The Guidelines

The Guidelines provide an updated insight into Revenue's interpretation and application of the R&D tax credit regime. The Guidelines are more detailed than previous Revenue guidance and convey an increased emphasis on the scope of qualifying expenditure and the importance of supporting documentation. The Guidelines also set out Revenue's view on the appropriate treatment of expenditure incurred on outsourced R&D activities and the transferability of unused credits between group entities.

Under the legislation, costs which are not incurred wholly and exclusively in carrying on the R&D activity do not qualify when calculating the credit. The Guidelines list a number of examples of such costs, including insurance, travel, repairs, maintenance and interest. The Guidelines also provide guidance on the treatment of staff costs for the purpose of the credit.

Documenting R&D activities

The importance of maintaining accurate, contemporaneous records in support of claims for R&D tax credits is emphasised in the Guidelines. A taxpayer should maintain sufficient contemporaneous supporting documentation to demonstrate that the activities in question are qualifying R&D activities and that all costs incurred in carrying on those activities have been properly accounted for. A failure to maintain adequate records may result in a claim for the R&D tax credit being disallowed. The Guidelines confirm that electronic records are sufficient in this regard. Revenue accepts that disparities exist in record-keeping practices across different industries.

It is anticipated that the enhanced R&D tax credit regime, coupled with the new Irish Knowledge Development Box (in respect of which initial draft legislation was issued in July 2015), will further incentivise Irish headquartered companies and multinationals to locate their R&D activities in Ireland.

Joe Duffy (joseph.duffy@matheson.com) and Tomás Bailey (tomás.bailey@matheson.com)

Matheson

Tel: +353 1 232 2000

Website: www.matheson.com

more across site & shared bottom lb ros

More from across our site

The EU is preparing countermeasures to protect its interests, Ursula von der Leyen said; in other news, the NRA is suing the state of Colorado over a 6.5% tax on the sale of firearms
The ruling is ‘well-structured’ in its references to the OECD TP guidelines, one expert says, while another argues it overlooks key technical issues
India also brokered its first-ever multilateral APA last year, the Central Board of Taxes announced
A global tax framework may not materialise anytime soon, but a common set of principles is becoming increasingly necessary, Rudolf Winkenius also tells ITR
Kingsley Napley’s claimants are arguing that taxing the provision of education breaches the European Convention on Human Rights
While pillar two can progress without the US, it won’t reach the same heights without American involvement, argues Renáta Bláhová, founding partner of BMB Partners Taxand
There are unanswered questions as to how foreign investors could reclaim money via tax credits, advisers suggested
Amid an ever-changing tax environment, India’s advisory market is bustling with competition ahead of the 2025 World Tax rankings and ITR Awards
The deal comes after PwC had accused Paul McNab of using confidential information; in other news, McDermott hired a new London tax head from a US rival
Looking at transfer pricing simplification is “obviously helpful”, but it should be done in line with current standards, a senior government figure reportedly said
Gift this article