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	Summary of Irish Corporate Tax Environment Corporation Tax System Company Profits Capital Gains Tax Distribution of Profits and Irish Withholding Tax Headquarters and Holding Companies Foreign Taxes – Double Taxation Agreements Research & Development (R & D) Tax Credit Patent Royalty Exemption Stamp Duty and Capital Duty Value Added Tax Customs and Other Duties Investing from the UK in Ireland

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RESEARCH AND DEVELOPMENT (R&D) TAX CREDIT

The Finance Act 2004 introduced a 20% tax credit for companies, for incremental qualifying expenditure over the amount spent in a base year on research and development activities. Some small changes to the scheme were made by the Finance Act 2006. Key features of the scheme are as follows:

the tax credit will be available to all companies within the charge to Irish tax, that undertake research and development activities ( which is not otherwise available for a tax benefit elsewhere ) within the EEA.
the tax credit is available on incremental R&D expenditure over a defined base. For the first three years of the scheme (2004-2006), the base year will be the R&D expenditure incurred in 2003. Thereafter there will be a rolling one year basis ie for 2007, the base will be expenditure incurred in 2004 and for 2008, the base will roll on to expenditure incurred in 2005 and so on.
Relevant expenditure (ie which qualifies for capital allowances) on the construction or refurbishment of a building or structure which is used for R&D is treated separately in calculating the research and development credit. Under the Finance Act 2006, this right has been extended to a proportionate part of the expenditure on qualifying plant or machinery.
companies claiming the R&D credit are not required to hold the IP rights resulting from the R&D work;
in general the cost of sub-contracting or outsourcing research and development will not qualify for the tax credit. However an amount of up to 5% of total research and development expenditure which is paid to a university or institute of higher education to carry out research and development activity may qualify;
where a company has insufficient corporation tax against which to claim the R&D credit in a given year, the tax credit may be carried forward indefinitely.

What constitutes Research & Development activities

Research and Development activities means, basic research, applied research or experimental development (as these terms are defined). Activities will not be research and development activities for the purposes of the relief unless they (a) seek to achieve scientific or technological advancement; and (b) involve the resolution of scientific or technological uncertainty.