By Paul Foley
Partner McKeever Rowan IFSC, Dublin 1 - February 2013 e: pfoley@mckr.ie
Small and Medium Sized Enterprises: Irish Government and EC initiatives
Small and Medium Sized Enterprises: Irish Government and EC initiatives Small and medium sized businesses make up over 99% of businesses in Ireland and account for almost 70% of people employed in the State. Indeed the Irish Government aims to make Ireland the best small country in the world to do business by 2016. Recognising the importance of the SME sector to Ireland, the Irish Budget 2012 and Budget 2013 have introduced a range of tax reforms to address the needs of SMEs. What follows is a snapshot of the more important measures and supports available for SMEs.
including, patents, registered designs, trademarks, knowhow, authorisation to sell medicines, certain computer software and goodwill that relates directly to the IP assets and certain computer software and or right to use/deal with computer software. The tax deduction is only available for utilisation against trading income generated from the exploitation of the IP assets and is subject to certain other restrictions. There is a specific minimum period of ownership of an intangible asset that a company must have in order to avoid a clawback of capital allowances on their disposal. Additionally there is an exemption from stamp duty on the sale transfer or other disposition of intellectual property as defined in the legislation.
Corporation Tax Ireland
Research and Development Tax Credit
Companies which are Irish incorporated (subject to some exceptions) or have their central management and control in Ireland and which carry on certain types of trading activities, are liable to only 12.5% Corporation Tax on all their Irish trading profits. This is one of the lowest rates of corporation tax in the EU. A rate of 25% applies to non trading (passive income).
An increasing and more competitive research and development tax credit, now set at 25% is available for expenditure on certain research and development activities ( natural sciences, engineering and technology, medical sciences and technology).
In the 2013 Budget the Government stated that it remains 100% committed to maintaining the 12.5% Corporation Tax rate. Capital allowances can be claimed by companies in respect of capital expenditure incurred in relation to the acquisition/ internal generation of certain Intellectual Property (IP) intangible assets on or after 7 May 2009 by either deducting the depreciation or amortization charge included in the annual financial statements of a company or alternatively, a company may elect to claim the tax deduction over 15 years (7% per annum and 2% in year 15). The definition of IP assets is broad and includes the acquisition of, or the licence to use of certain IP rights
The legislation introduced the concept of a base year for calculating the qualifying expenditure. It was the incremental spend above the figure set for the base year that qualified for the R&D tax credit. For accounting periods after 1st January 2013, the first â‚Ź200,000 of group expenditure on R&D is excluded from the incremental calculation. The tax credit is due on such expenditure at 25% without reference to the 2003 threshold amount. The tax credit in respect of a group expenditure in excess of â‚Ź200,000 will continue to be allowed on an incremental basis with reference to the 2003 threshold amount. Additionally a 25% tax credit may, subject to conditions, be claimed for expenditure on building or structures used for research and development. There is no calculation of a base for expenditure on buildings. However, there is provision for full clawback of the credit where the building is sold/
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