This year, Minister Donohoe reaffirmed his commitment to the international Two-Pillar solution to address tax challenges of digitalisation to ensure the global tax system keeps pace with technological developments and also announced that serious consideration will be given to a move towards a territorial corporation tax system. The Budget measures announced today are aimed at supporting enterprise with the extension of a number of key tax reliefs and aligning the refund of the R&D tax credit with international regimes.

Research & Development (R&D) Tax Credit

It was announced today that Finance Bill 2022 will introduce changes to the payment provisions for the R&D tax credit to align  with international tax reforms taking place at EU and OECD level. This was called for by the CCAB-I in its Pre-Budget Submission 2023 and in its response to the Public Consultation on the Research & Development Tax Credit and the Knowledge Development Box. The R&D tax credit provides for a 25 percent tax credit for all qualifying R&D expenditure. The changes announced today are outlined below:

• The current system of offset against corporation tax liabilities and payment in three payable instalments is being changed to a new fixed three-year payment system.
• A company will have an option to call for payment of their eligible R&D tax credit or to request for it to be offset against other tax liabilities.
• Existing caps on the payable element of the credit are being removed.
• The first €25,000 of a claim will now be payable in the first year.
• Transitional measures will be in place for one year, to smooth the transition to the new payment system for companies that are already engaged in research & development activities.

Knowledge Development Box (KDB)

The KDB, which was due to expire at the end of the year, will be extended for a further four years until 1 January 2027. The KDB will have a new effective rate of 10 percent (previously 6.25 percent) to come into effect from a date to be set by commencement order which will be determined by progress on the implementation of the Pillar Two Subject to Tax Rule. This is expected to occur at some point during 2023.

The KDB is a Corporation Tax relief  to encourage innovation by applying a lower rate of corporation tax on profits on Intellectual Property Assets resulting from qualifying research and development activity. In its response to the Public Consultation on Pillar Two Minimum Tax Rate Implementation, the CCAB-I called for the KDB to be restructured in light of ongoing reforms at an international level.

Film Corporation Tax Credit

The Film Corporation Tax Credit will be extended in Finance Bill 2022 beyond the current end date of 2024 until 31 December 2028. Section 481 TCA 1997 is a tax credit, incentivising film and TV, animation and creative documentary production in Ireland.

Key Employee Engagement Programme (KEEP)

Announced today was the extension of the KEEP scheme until 31 December 2025. The KEEP scheme was designed as a share option programme to assist SMEs attract and retain talent in a competitive job market. Today’s announcement that the issuing company can buy-back the KEEP shares should provide a much-needed market for the disposal of shares in small Irish companies and increase the uptake of the scheme. In its response to the Public Consultation on the Key Employee Engagement Programme, the CCAB-I highlighted this as a key measure to enhance the attractiveness and operation of the KEEP scheme.

Also announced today was the increase in the lifetime company limit for KEEP shares being raised from €3 million to €6 million.

The Finance Act 2019 provisions that have not yet been enacted will be brought into effect following approval by the European Commission.

Special Assignee Relief Programme

The Special Assignee Relief Programme (SARP) has been extended to 31 December 2025 and the minimum income limit for new entrants will increase from €75,000 to €100,000.

The SARP scheme is aimed at employees who have been assigned by their employer to relocate to Ireland to work for that same employer. Where certain conditions are satisfied, 30 percent of qualifying employment income will be disregarded for income tax purposes.