The Minister for Finance, Paschal Donohoe and Minister for Tourism, Culture, Arts, Gaeltacht, Sports and Media, Catherine Martin, recently launched a new Digital Gaming tax incentive in Ireland. The new legislation provides up to 32% relief for companies on expenditure incurred on developing Digital Games. As with most tax incentives, there are certain eligibility conditions that need to be met by Digital Games Development Companies to qualify for tax relief.
In this article, we answer the key questions you should know if you are interested in the new tax credit.
1. How is the relief calculated?
The relief is calculated as 32% of the lowest of:
A. The eligible expenditure amount.
B. 80% of the qualifying expenditure, or
C. €25,000,000
The relief can be used to offset corporation tax liabilities, or where no liabilities exist should be available as a cash refund.
2. When can you start to claim?
The new tax incentive is effective, and expenditure allowable, after 22nd November 2022. Therefore, if you have been developing a game that fits within the eligibility criteria, it is possible to start considering claiming immediately for any new game development.
3. What is the definition of a digital game?
At a summary level, a Digital game is published on an electronic medium and incorporates three of either:
4. Key eligibility criterion
There are some critical components to be considered in determining a company’s potential eligibility for the digital games tax credit, such as:
- The Digital Games Development Company must be a tax resident in the State or the European Economic Area (“EEA”),
- The tax credit is subject to a minimum qualifying expenditure amount of €100,000,
- The Digital Games Development Company must provide quality employment,
- An application must be made to the Minister of Tourism, Culture, Arts, Gaeltacht, Sport and Media in respect of any Digital Game to be developed,
- The digital game should not be aimed at promoting gambling, violence, crime, or hatred towards societal groups,
- The development of the digital game must contribute to the promotion and expression of Irish / EEA culture (i.e. must pass the ‘cultural test’),
As with most new tax incentives, it can be confusing for companies to begin making a claim. However, after reading our article, if you feel you may fit the above criteria, one of our team would be happy to answer any questions and advise you on the next steps.
Additional information on the cultural test, calculation examples and more can be found on our website.
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