Knowledge Development Box
A public consultation process was announced in Budget 2015 for the development of a Knowledge Development Box, similar to the Patent Box which is currently in operation in other countries. The mechanics of the Knowledge Development Box have since been agreed upon and full details of this measure will be contained in the Finance Bill. Under this new regime, profits arising in respect of certain patents and copyrighted software which has resulted in qualifying R&D in Ireland will be subject to a lower rate of corporation tax of 6.25%. Minister Noonan has indicated that the proposed Knowledge Development Box will be the first OECD compliant regime of this nature.
It is hoped that this new lower rate of corporation tax combined with additional tax incentives already available to companies such as the research and development tax credit and the intangible asset regime should assist in increasing Ireland competitiveness in an international context in terms of attracting foreign direct investment.
3 Year Relief for Start-up Companies
The corporation tax exemption available to start-up companies whose tax liability does not exceed €40,000 has been extended to new start-ups for a further three years. This incentive was originally introduced in Budget 2009 and has been extended and modified in recent Budgets.
Following changes to the film tax incentive regime brought in by Finance Act 2013, only a film producer company can qualify for a corporation tax credit in respect of their film investment. The amount of the corporation tax credit was limited to an amount equal to 32 per cent of the lowest of the eligible expenditure amount, 80 per cent of the total cost of production of the film and a cap of €50 million.
Budget 2016 announces that the cap on the amount of eligible tax relieved expenditure has been increased from €50 million to €70 million. This new measure is subject to State aid approval.
International Tax Strategy
In order to enhance transparency, measures will be introduced in the Finance Bill to provide for country-by-country reporting in line with the OECD recommendations.