R&D Tax Credit

The Research and Development (R&D) tax credit,  administered by the Irish Revenue Commissioners is open to all companies in Ireland that are undertaking qualifying research and development activities in Ireland or within the European Economic Area. Qualifying R&D expenditure will generate a 25% tax credit for offset against corporate taxes in addition to a tax deduction at 12.5%.

This means that companies undertaking qualifying R&D can claim a refund from the Revenue of €37.50 for every €100 worth of R&D expenditure. So, effectively, the R&D tax credit reduces the real cost of R&D by up to 37.5%.

The tax credit is primarily available for offset against the current year’s or immediate prior year’s corporation tax liability and is in addition to the corporate tax deduction that is otherwise available for the expenditure.  Claims for R&D tax credits must be made within twelve months from the end of the accounting period in which the R&D expenditure was undertaken.

R&D activities can also result in cash refunds. If a company does not have a tax liability in the current or immediate prior period, it can claim a repayment in cash of R&D tax credits in three equal instalments over a three-year cycle. Alternatively, the taxcredit will be offset against future tax liabilities. The refund is limited to the greater of the corporation tax payable by the company in the precedingten years or the payroll liabilities for the period in which the relevant R&Dexpenditure is undertaken.

For further information, see Research & Development (R&D) Tax Credit on Irish Revenue website.