Generating cash from Irish R&D activities

Ireland’s research and development (‘R&D’) tax credit regime has positioned Ireland to the forefront of locations to develop, manage and exploit intellectual property.

In 2008, 40% of Ireland’s foreign direct investment projects related to R&D. Allied to the new Intellectual Property (IP) tax regime introduced in 2009 and Ireland’s range of R&D grant incentives, Ireland’s enhanced R&D tax credit regime makes the country an excellent location for R&D activities for both indigenous and international investors.

A series of positive R&D tax credit changes have been introduced since 2004, and extensive and welcome amendments have also recently been introduced. Essentially, the new regime supplements the existing tax credit scheme and provides for the monetisation of unutilised R&D tax credits in certain circumstances for the first time.

The Commission on Taxation, established in 2008 to review the structure, efficiency and appropriateness of the Irish taxation system, contained a strong endorsement of the R&D tax credit regime in its September 2009 report. The report also included a proposal to allow companies offset the R&D credit ‘‘above the line’’ against employers PRSI. The proposals in the report will be considered by the Irish government in the coming months.