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IN BUDGET 2016, the government announced the Knowledge Development Box (KDB).
The scheme was set up to allow companies to halve the corporation tax paid on income once it was generated from research and development conducted here.
The government says it included features in the KDB to specifically encourage small and medium businesses (SMEs) to make claims.
One such feature was that smaller companies may be able to claim relief on assets which are patentable, but not patented. As opposed to larger companies that may only claim relief in respect of searched and examined patents or copyrighted software.
In order to make a claim, companies need to apply to for certification that the assets are eligible. The Knowledge Development Box KDB Certification of Inventions Act was passed last year.
However, the Minister for Finance has admitted that so far no SMEs have applied for the KDB certificate.
I have been advised by the patents office that they have not received any applications to date in relation to the KDB certificate for SME’s.
“However, I would note that the KDB certificate has only been available to firms since last year, through the introduction of the KDB (Certificate of Inventions) Act 2017, and firms may yet be considering applications for the certificate. Furthermore, firms of all sizes can avail of the KDB scheme through the usual patent process.”
Minister Paschal Donohoe added that companies have a 24 month time frame available to avail of the KDB.
“Therefore, it is anticipated that more companies will make use of this 24 month time frame.”
He said further claims in respect of the year ended 31 December 2016 may be made by September 2018.
Probably so complicated to get it will turn most off
The point of the knowledge box was to allow large multi-nationals to avoid tax. It allows them to relocate their IP in Ireland, set up a subsidiary that holds the IP, then the parent company pays to use it (generally whatever it takes to reduce the profit on their ballance sheet, which reduces their tax liability). It was obvious that the sole reason that this was set up was to try to replace the ‘double-Irish’. Noonan didn’t intend for SME’s to use it. What SME sets up subsidiaries to avoid tax?
@Darren Gray: the knowledge box was to give a tax incentive for r&d work in Ireland, not for imported IP. It’s a version of the OECD “modified nexus”, and requires the IP to be documented from start to finish in Ireland, so is exactly the opposite of the double Irish. The reason SMEs don’t take it up is due to the documentation requirements, but otherwise it was always intended for multinationals anyway.
@Darren Gray: Correct, it replaced the “double Irish” tax avoidance scheme.
@leartius: I know of one particular multinational that hires 2 people in R&D neither of which do any research. It’s purely a tax break
Revenue taking an idea and adding I. Their usual 25 hoops to jump through
Another Success story
Why use it? when most large multinationals are already paying less than 1%? The EU have decided that the Irish government can’t be trusted with tax, hence the apple case. They are preparing to move the collection of multinationals tax outside Ireland. Companies will take advantage of our resources and pay tax in Germany, France and other large nations, we will loose twice. Thank FG!
There just aren’t many small companies carrying out that level of research here.
@SC: IP can be a companies logo or trademark. It doesn’t have to be research and development, there’s already a 25 per cent tax credit for that.
@SC:
Agree! Seed Capital in sufficient quantities is quite hard to source in Ireland for R & D work required by the novice inventor working on their brainchild.
Although the various incubator centres (business) springing up around the country are welcome, more could be done imho by the deep-pocketed established entrepreneurs to help out the younger generation of budding inventors on the island.
There have been a large number of schemes introduced to fanfare by Ministers as the solution to a problem which have close to zero uptake. I was reading yesterday that the €40K grant to do up a vacant property for rent only had nine applicants despite a budget of millions having been set aside for it. Same goes for the scheme to help those who have been rejected for a mortgage by two banks. It turned out that banks rarely reject people outright but instead offer them derisory loan amounts. So yes, another amazing scheme with zero interest because of how it was designed.
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