- R&D Tax Credit: This is a 25 percent tax credit for certain qualifying research and development expenditure. Companies that successfully claim an R&D tax credit can set it against their Corporation Tax liability.
- Knowledge Development Box: This incentive became effective on 1 January 2016 and applies to companies with intellectual property assets that are the result of qualifying research and development activity carried out in Ireland. Under the KDB, profits from patented inventions, copyrighted software or intellectual property equivalent to a patentable invention may be eligible to be taxed at a lower corporation tax rate of 6.25%
Other incentives for innovation
Apart from incentives provided through the tax system, there are various competitive funding programmes and grants for innovative businesses. For example, Enterprise Ireland provides innovation vouchers to incentivise small companies to develop innovative solutions to technical and business challenges. The idea behind the vouchers is to encourage collaboration between research institutions and small businesses. An innovation voucher is worth €5,000.
Horizon 2020 is an EU programme incentivising companies to participate in collaborative research projects with other companies and research institutions across Europe. A number of Irish SMEs have received funding under Horizon 2020’s ‘SME Instrument’ since its launch in 2014.
If you are applying grants and/or tax incentives, it is essential to comply with the requirements of each scheme. Ensure that you understand the rules and that all of your documentation is in order — otherwise, you may lose out on potential financial benefits.
The various incentives for innovation can be time-consuming and confusing to navigate. If your business is engaged in research and development or other innovative work, contact Brady & Associates to find out how we can help.