Knowledge Development Box
An interesting announcement from the international perspective was the introduction of the Knowledge Development Box (KDB) and the associated corporation tax rate of 6.25%.
The instrument is aimed at SMEs, start-ups and investors in the technology sector. It is similar to the ‘Patent Box’ introduced in the UK in 2014, generally maintains Ireland’s competitive tax regime, and is likely to convince home-grown tech firms to stay put.
It comes as part of an overall response to the OECD’s Base Erosion and Profit Shifting (BEPS) reports, and the Government’s efforts to bring more transparency to the country’s tax regime, which has been loudly debated in Europe and beyond. The BEPS report seeks to ensure that taxable profits are based on real economic activity.
The Irish Tax Institute contributed to the consultation process on the KDB.
“It is expected that the KDB will contain provisions which are designed to make it more accessible for certain SMEs (being companies with a global turnover of less than €50m and who derive income of less than €7.5m annually from IP assets).
“In particular, SMEs who develop assets which are not patent protected can still be eligible for the scheme, provided that the company receives formal certification from an independent government agency. A strong focus of the Institute’s submission on the regime was to ensure that the KDB would be ‘SME friendly’ so this provision is welcomed,” the Institute says.
It was set up under a BEPS framework, and so it is the “first IP Box globally to comply with the OECD’s new standards”, the Irish Tax Institute says. It comes into effect on January 1 next year.
Other tax measures
Those involved in tourism were relieved to hear that the reduced VAT rate of 9% would be maintained for that sector. Film relief was also increased from €50m to €70m.
General stock relief, stock relief for young farmers and for registered farm partnerships was extended until 2018, while new rules on farm succession transfer partnerships were announced.
The commercial motor tax system has been overhauled, with five rates ranging from €92 to €900 replacing the current 20 rates from New Year’s Day.
And the entry point for the top rate of Employer PRSI was increased to €376 a month.