Corporate Tax

Oct 13, 2020

Again, this year the Minister reaffirmed Ireland’s commitment to retaining the 12.5 percent corporation tax rate. The measures announced today are aimed at the digital, innovative & film industries - perhaps cleverly investing in future growth sectors to support the rebound of the economy. Highlights announced include the creation of a digital gaming tax credit, a change to the Intangible Asset regime along with extensions to several reliefs which were due to expire. Furthermore, the Minister will publish an update on Ireland’s Corporation Tax Roadmap and its response to the OECD's latest international tax proposals.

Digital Gaming Tax Credit

The Minister for Finance announced that work will commence in 2021 on the development of a tax credit for the digital gaming sector. We can expect the credit to be in effect as soon as January 2022. In his speech, the Minister said that ‘this is a sector that has seen exponential global growth in the past decade, and there are potential synergies with our established film and animation sectors to support quality employment in creative and digital arts in Ireland’.

Intellectual Property Regime

A change will come into effect from tomorrow on the intangible asset regime provided for in Section 291A Taxes Consolidation Acts 1997. According to the Minister for Finance, the change is to ensure that Ireland’s tax regime for intellectual property is fully consistent with international best practice. The legislation will be amended so that that all intangible assets acquired from 14 October 2020, will be fully within the scope of balancing charge rules. This change will come into immediate legal effect by way of a Financial Resolution.

Film Tax Credit

The Section 481 Taxes Consolidation Act 1997 Relief for investment in films – Regional Uplift Scheme will be extended to 31 December 2023. The scheme supports the development of new, local talent in areas outside the main production hubs.  A company can apply for an uplift to the percentage used to calculate the film corporation tax credit.  The five percent uplift rate is extended to 31 December 2021. It will then reduce to three percent in 2022, two per cent in 2023 and to zero in 2024. The extension is as a result of the industry being affected by COVID-19 related shutdowns and therefore the uplift for 2020 being lost.

Exit Tax Technical amendment

The Minister for Finance announced a technical amendment to the Exit Tax rules (Section 627 Taxes Consolidation Act 1997) to clarify the operation of interest on instalment payments. It will be introduced with effect from midnight tonight by way of Financial Resolution – which is where we can expect to see the detail of this change. 

Knowledge Development Box extended

The Knowledge Development Box (KDB) is being extended for a further two years until end 31 December 2022. The KDB is an OECD-compliant intellectual property regime that supports businesses in retaining and exploiting assets that have resulted from Research & Development activities in Ireland. The annual cost of this measure is estimated to be €14 million.

OECD update

In his speech, the Minister for Finance touched on the ongoing OECD international tax reform. He will publish an update on Ireland’s Corporation Tax Roadmap in due course. This will consider the latest reports published by the OECD BEPS Inclusive Framework on its work to address the tax challenges of digitalisation. Further work is needed at international level before final agreements can be reached and therefore Ireland’s corporate tax take should not be affected in 2021. However, change is inevitable sometime in the future.

The Minister outlined that agreement at the OECD level would present challenges for Ireland as changes to the international tax framework would see a reduction in the level of profits taxable here. Failure to reach agreement at the OECD would also have negative consequences for Ireland. The future direction of the global and European corporation tax landscape will be decided upon next year.