R&D Tax Credit Ireland
The R&D Tax Credit Programme was introduced in 2004 to encourage Irish-based companies to perform R&D and to promote investment in innovation.
RESEARCH & DEVELOPMENT TAX CREDIT IRELAND
Maximise your return on Research & Development Tax Credit with advice from Visiativ Ireland
What are R&D Tax Credits?
The R&D tax credit serves as a valuable incentive encouraging investment in research and development among companies in Ireland. This credit allows you to receive up to 25% of your R&D expenditure (both revenue and capital) as a tax credit or in cash, provided certain conditions are met. Additionally, this credit complements the 12.5% corporation tax deduction at the standard rate. Eligible R&D activities span diverse fields including software development, engineering, food and beverage production, medical devices, pharmaceuticals, oil and gas, aerospace, agriculture and agri-food.
Who is eligible for R&D Tax Credits?
There’s a widespread misconception about Research and Development (R&D), often seen as limited to specialised teams or high-tech labs. However, many companies benefiting from R&D tax credits have eligible expenses rooted in innovation within their operations. Expenses aimed at enhancing products or services, even if projects don’t yield expected outcomes, may qualify. Any company in any industry, including Irish ones, may be eligible for R&D Tax Credits. The key is engaging in development activities seeking advancements in science or technology, such as creating new products, processes, or services, or modifying existing ones.
What Type of R&D Expenditure is Claimable?
Qualifying expenditures for the R&D tax credit encompass a range of eligible costs, such as employee wages, third-party contractor expenses (particularly those contractors engaged in R&D within the European Economic Area), material costs, machinery and equipment investments, as well as overhead expenses. This valuable tax credit can be claimed based on the eligible expenditure incurred during the fiscal accounting year in connection with your research and development endeavours.
The R&D Tax Credit Claiming Process
Preparing an R&D tax credit claim entails identifying and documenting eligible R&D activities and associated expenditures, and adhering to legislative and Revenue Guidance requirements. Visiativ Ireland’s leading R&D Tax Credit practice has been pioneering this field since the inception of the R&D tax credit in 2004. Our team possesses the necessary tax, financial, and scientific expertise to assist companies of all sizes and sectors in preparing their claims. Utilising proven methodologies and processes, we ensure your claim is comprehensive, accurate, and audit-ready. The stages of preparing an R&D tax credit claim include feasibility study, detailed claim preparation, submission to Revenue, and audit preparation/support.
Does the Opportunity Expire?
The window of opportunity for R&D tax credit claims typically closes 12 months after the conclusion of your fiscal year. For instance, if your fiscal year concludes on December 31, you should aim to submit your claim by December 31, 2020, for activities related to your 2019 fiscal year. To maximise your benefits, Visiativ advises against delaying your claim submission until the deadline approaches. Instead, consider initiating the process concurrently with your CT1 filing, rather than treating it as a post-deadline amendment.
Frequently Asked Questions
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- Who administers the R&D Tax Credit scheme in Ireland?
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The Revenue Commissioners, which is the Irish tax authority, administers the R&D Tax Credit scheme in Ireland. Revenue state that companies must ensure that the R&D claim they submit, meets all the requirements before applying.
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- What types of R&D activities are eligible for the tax credit in Ireland?
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Eligible R&D activities include those aimed at achieving scientific or technological advancements through the resolution of technical uncertainties.
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- What are R&D Tax Credits?
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The Research and Development (R&D) Tax Credit is a tax incentive provided by Revenue to encourage businesses to innovate by investing in research and development activities. It is designed to promote scientific and technological advancement by allowing eligible companies to get a portion of their R&D expenditures back in cash/tax refunds.
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- Is R&D Tax Credit Taxable?
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R&D Tax Credits are not typically considered taxable income for the company receiving them. They are designed to reduce the company’s tax liability or boost their cashflow.
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- How does R&D Tax Credit work?
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Companies engaged in qualifying research and development activities can identify eligible expenses related to those activities, such as wages, consumables, overheads, machinery and subcontractors These expenses are then used to calculate the R&D Tax Credit, which is 25% of those eligible expenses. The credit is then applied to either reduce the company’s tax liability or to take as a cash refund.
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- Who Qualifies for R&D Tax Credit?
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Any company in any industry that engages in activities aimed at scientific or technological innovation, process improvement, and the development of new products or technologies are eligible. Eligibility may depend on factors such as the nature of the research, the novelty of the technology, and the associated costs to determine if it meets the criteria set out by Revenue.
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- Is there a minimum expenditure threshold to qualify for the R&D Tax Credit in Ireland?
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Yes, there is a minimum expenditure threshold of €25,000 to qualify for the R&D Tax Credit in Ireland.
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- Can startups and small businesses benefit from the R&D Tax Credit scheme in Ireland?
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Yes, both startups and small businesses can benefit from the R&D Tax Credit scheme in Ireland, provided they meet the eligibility criteria. In fact, contrary to popular belief both loss-making and profit-making companies can both avail of R&D Tax Credits.
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- Can the R&D Tax Credit be used to offset payroll taxes, such as PRSI and PAYE, in Ireland?
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Yes, eligible companies in Ireland can use the R&D Tax Credit to offset their liability for payroll taxes like PRSI (Pay-Related Social Insurance) and PAYE (Pay as You Earn).
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- What documentation is required to support a claim for the R&D Tax Credit in Ireland?
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To make a claim, companies need to provide technical and financial documentation demonstrating the nature and costs of their qualifying R&D projects. They must also maintain Payroll, Timesheets, Invoices, and internal reports relating to the claim.
