Ireland: “Knowledge development box” opportunities for Irish, overseas firms

Ireland: “Knowledge development box” opportunities

The government last year proposed the “knowledge development box” tax incentive as a replacement for the “double Irish” regime. The final version of the knowledge development box as unveiled in the budget 2016, however, is somewhat different—it is narrower in scope, and contrary to expectations, those taxpayers that may benefit the most from the knowledge development box in the short term are likely to be Irish small and medium size enterprises, rather than large corporations whose Irish operations were originally intended to gain the most.

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To qualify for knowledge development box tax relief in Ireland, a company’s profits must derive from intellectual property (IP), such as patents and copyrights, when a proportion of the spending to create that IP took place in Ireland.The knowledge development box’s rate is set at 6.25% or one-half the 12.5% corporate tax rate in Ireland. 

The knowledge development box is the first global regime to comply with the OECD’s rules on base erosion and profit shifting (BEPS) that are intended to curb global corporations’ efforts to minimise their tax liabilities by artificially moving profits to low-tax or no-tax locations where little or no real economic activity takes place. 

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