On August 11, 2016 the Irish Revenue issued eBrief No. 73/16 via which it announced the publication of Guidance Notes On the Knowledge Development Box.
The Irish Knowledge Development Box (Hereafter: KDB) was introduced by Finance Act 2015 for companies whose accounting period commences on or after January 1, 2016. It is a regime for the taxation of income which arises from patents, copyrighted software and, in relation to smaller companies, other intellectual property that is similar to an invention which could be patented. The regime is only available to companies that carried out the research and development (R&D), within the meaning of section 766 Taxes Consolidation Act 1997 (TCA 1997), which led to the creation of the patent, copyrighted software or intellectual property (IP) equivalent to a patentable invention.
A company which qualifies for the regime will be entitled to a deduction equal to 50% of its qualifying profits in computing the profits of its specified trade. In effect, the profits arising from patents, copyrighted software or IP equivalent to a patentable invention are taxed at 6.25%.
In the Guidance Notes published on August 11, 2016 the Irish Revenue sets out how the KDB works.
A.o. the following topics are discussed in the Guidance Notes:
· Introduction
o What is the Knowledge Development Box?
o What these Guidance Notes are about
o What law these Guidance Notes cover
o Terminology
o Status of these Guidance Notes
· The key definitions
o Qualifying asset [S. 769G(1), 769H & 769R]
o Profits from exploiting the qualifying asset
o Cost of developing the qualifying asset
o Comparison to R&D tax credit
· The relief [s.769I]
o What is the relief [s.769I(1)]
o Interaction with other provisions
· Knowledge Transfer Ireland and Enterprise Ireland’s Technology Centres
o Knowledge Transfer Ireland
o Enterprise Ireland’s Technology Centres (EITC)
o Key differences from the R&D tax credit
· Documentation requirements [section 769L]
o What the documents must show [section 769L(1)]
o When the documents must be prepared [section 769L(1), (3) & (7)]
o Requirement to retain records [section 769L(3) & (4)]
o Application of transfer pricing standards [section 769N]
o Standard of proof for SMEs
o Link with R&D tax credit documentation
o Examples of documentation
· Making a claim
o How to make a claim [section 769I(2)]
o Time limits for making a claim
· Transitional arrangements [769O]
o Acquisition costs incurred prior to 1 January 2016
o Group outsourcing costs incurred prior to 1 January 2016
o Qualifying expenditure incurred prior to 1 January 2016
· Engaging independent experts [section 769I(6)]
o Introduction
o Similarity to R&D tax credit
o What can the independent expert opine on?
· Steps to claiming relief under the KDB
o High level review to determine which IP should be the subject of a claim
o Detailed review to calculate the KDB claim
Click here to be forwarded to the Guidance Notes On the Knowledge Development Box as available on the website of the Irish Revenue (The Guidance Notes are available in the form of a downloadable Pdf document).
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