Enhancements to the research and development (R&D) tax credit, and start-up relief for companies were the main features. A new corporation tax relief is to be introduced for expenses incurred on an initial stock market listing. And, as expected, the new participation exemption for foreign sourced dividends will commence from 1 January 2025.
The R&D tax credit remains an important feature of the corporation tax (CT) system and provides a 30 percent tax credit for qualifying R&D expenditure. The regime’s primary policy objective is to increase business R&D in Ireland, as R&D contributes to higher innovation and productivity. More broadly, the tax credit forms part of Ireland’s CT offering and is aimed at attracting FDI and building an innovation-driven domestic enterprise sector. The credit enables Ireland to remain competitive in attracting quality employment and investment in R&D.
Given its importance, it is proposed to increase the first-year payment threshold from €50,000 to €75,000. This threshold is the amount up to which a claim can be paid in full in the first year, rather than being paid in instalments over three years. The increase should therefore provide valuable cash-flow support to companies undertaking smaller R&D projects or engaging with the credit for the first time.
It is estimated, based on 2022 claims (the latest data available), that increasing the payment threshold to €75,000 will increase, to circa 44 percent, the proportion of claimant companies qualifying for payment of the credit in full in the first year.
Section 486C start up relief
Section 486C start up relief currently provides a CT relief for new small companies in the first five years of trading with an annual CT liability of less than €40,000. Marginal relief is available to Companies with a CT liability of between €40,000 and €60,000 to ensure companies with a liability just over €40,000 do not lose the full value of the relief. Section 486C allows relief of up to €40,000 per year against CT liabilities, which may be carried forward where not fully used in the five years. The relief is currently calculated by reference to employer PRSI paid of up to €5,000 per employee. This does not encompass PRSI paid by owner-directors.
This measure proposes to extend the qualifying criteria to allow up to €1,000 of Class S PRSI per individual to count toward this cap and aims to provide much needed support for small, owner-managed start-up companies.
As noted earlier, the participation exemption for foreign dividends which will provide for a significant simplification of double tax relief for Irish companies with foreign subsidiaries will commence from 1 January 2025 as expected. Further details of this measure are set out in in Chapter 8 of the Budget 2025 Tax Policy changes publication.
Relief for listing expenses
A new measure is to be introduced which will provide relief for expenses incurred on an initial stock market listing. This measure aims to support businesses in the scale-up phase of their growth and development and should also encourage more stock exchange listings, whilst also providing wider positive benefits for the Irish economy.
The deduction will be available for expenses incurred wholly and exclusively on a first listing (IPO) on a recognised stock exchange in Ireland or the EU/EEA area. The relief will be available to investment companies as an expense of management, or to trading companies as a trading deduction.
An overall cap of €1 million of expenses per listing will apply, with the relief being claimable by a company in the year of first successful listing. Expenses wholly and exclusively incurred for the purposes of the listing, both in the year of listing and the previous three years, will be allowable, subject to the overall €1 million cap. The measure will apply for successful listings completed on or after 1 January 2025.
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