Budget 2015: 6 key changes for tech companies

14 Oct 2014

Leinster House in Dublin

While Ireland’s Minister for Finance Michael Noonan addressed the Dáil on the provisions of Budget 2015, six points began to emerge to make tech companies sit up and take notice.

Ireland still part of the 12.5pc

The Government are holding on strongly to Ireland’s low corporate tax rate of 12.5pc that has been on the end of continuous criticism from the EU, and pretty much every government who have looked at us with envious, and no-doubt critical, eyes.

In no uncertain terms, Michael Noonan stressed that Ireland’s famously low corporate tax rate is going nowhere now or in the foreseeable future saying: “The 12.5% tax rate never has been and never will be up for discussion… it is part of settled policy.”

No Government in their right mind would change the policy that has even united almost all parties in the Dáil and was met with a rather vocal cheer when he uttered the above statement.

The ‘Double Irish’ is gone

One thing that is definitely going however is the infamous ‘double Irish’.

This may come as the least surprising news of the day for those who would have been waiting with baited breath prior to this afternoon’s announcement.

Having been availed of, or exploited depending on who you were talking to, for 34 years since Apple arrived on Irish shores, the tax loophole that has allowed some of the biggest tech companies in the world to avoid, or pay little to no tax here in Ireland is no more.

Known as the double Irish, with the help of the Dutch sandwich, the loophole will be closed beginning from January first for new companies while those already well-established here will have some time to prepare for what there next strategy may be.

As was also reported earlier, 2020 has been set as the cut-off point for the likes of Facebook, Google, Apple, Twitter et al to change their tax strategy to the latest government aid, the ‘Knowledge Development Box’.

Grand Canal Dock in Dublin is home to many of the companies who have been availing of the ‘double Irish’ tax loophole.

Introduction of Knowledge Development Box – what is it?

Sounding more like an aide to help small children learn, the Knowledge Development Box is the Government’s new plan to help the same companies who have been using the double Irish system retain some of the money they have been so keen to keep in the companies’ financial reports.

While details remain rather scant at the time of writing, the new incentive will allow the major tech companies to pay an as-yet undecided lower rate of tax from profits where the company’s intellectual property is based in Ireland.

This is seemingly similar to the Patent Box established in the UK back in April 2013 that supported a similar idea within the research and development sector, but will no doubt be expanded to include a variety of different industries, particularly those in tech.

As more details will no doubt emerge in the coming, days and weeks, Minister Noonan has stressed that the EU will be very much aware of what the Government have in mind for the Knowledge Development Box as it will be put before them and the OECD for approval.

Boon to R&D with new 25pc tax credit

In some good news for those operating in the R&D sector, a new corporate tax credit of 25pc has been broadened the scope and made it much more attractive to developing companies to kickstart new research.

Meanwhile, the special assigned relief programme (SARP) has also been amended to help attract more foreign investment into the country by extending the programme for a further three years until the end of 2017 and the upper salary threshold is being removed. The residency requirement is also being amended to only require Irish residency and the exclusion of work abroad is also removed with the requirement to have been employed abroad by the employer is being reduced to six months.

The landing of the National Digital Research Centre (NDRC) in Dublin, one of the largest start-up accelerators in the country.

Three-year relief extension for new start-ups

The Government is no doubt very aware of the flourishing start-up community within Ireland and has decided to continue incetivising those looking to develop their ideas with the help of an extended three-year relief from corporation tax or trading income, with certain capital gains as much as €2m in 2015.

Businesses beginning operations in 2015 will also be able to avail of these tax breaks and the success of it will be reviewed again next year.

Allowances given for energy efficiency extended to 2017

The Government is also trying to keep its target firmly set on the Europe 2020 climate agreement by continuing to offer companies who invest in energy efficient equipment the ability to receive accelerated capital allowances.

Under the original plan, this was to be phased out by the end of this year but has now thankfully been extended to at least the end of 2017 following a review by the Department of Communications, Energy and Natural Resources.