Budget 2021 | Knowledge Development Box and Digital Gaming

Mark O'Sullivan, Partner, Research & Development Incentives |

14 October 2020

Mark O’Sullivan, Head of R&D Technical Services, provides a summary of the key corporate tax reliefs relevant to companies in the areas of IP exploitation and Digital Gaming that were referenced as part of the Budget 2021 announcement.

Knowledge Development Box Extension

The KDB regime was due to expire at the end of 2020, and as expected, this regime has been extended until at least the end of 2022. The aim of the regime is to increase the level of R&D that is carried on by Irish resident companies and encourage subsequent exploitation of the Intellectual Property created from Ireland. This is achieved by offering a reduced effective tax rate, as low as 6.25%, on qualifying profits generated from the IP created.

It is noted that the R&D tax credit regime, which was introduced in 2004 in the same extensible manner, has now become a core tax incentive attracting investment in R&D in Ireland. It is hoped that the KDB regime will follow the same pattern, becoming a core incentive to further attract and support companies carrying out R&D in Ireland for many years to come. See if your company can avail of this regime by using our assessment tool.

Digital Gaming Sector Tax Credit

The commitment to introducing a Digital Gaming Sector credit in 2022 is good news, as this has been a topic of conversation within government for almost a decade. As referenced in the budget announcement, the digital gaming sector has grown significantly, with Ireland now home to a number of the largest digital gaming companies in the world.

Established credit regimes for this sector are already in place in other jurisdictions such as the UK, France, USA and Canada. As such, the introduction of this credit is essential in order for Ireland to remain competitive and continue to attract new inward investment, as well as to support Irish indigenous companies in this highly competitive sector.

BDO will seek to pro-actively engage with clients and Government in framing this tax credit regime in 2021, prior to its introduction in January 2022.