Foreign direct investment (FDI) will continue to receive a favourable tax rate with the help of a now-approved OECD Knowledge Development Box (KDB) that will see the corporation tax rate for it set at 6.25pc.
Announcing to the Dáil the key decisions made as part of Budget 2016, Minister for Finance Michael Noonan TD put particular emphasis on the importance of R&D, innovation and FDI to the Irish economy under what he described as our new economic model.
Particularly interesting for Ireland from an FDI perspective was that companies looking to invest in Ireland that plan to undertake R&D here will be able to receive the rather favourable corporate tax rate of 6.25pc that falls under the remit of the KDB.
Taking effect on 1 January 2016, there will also be included a 25pc tax credit for R&D operations within Ireland.
Minister Noonan said that, for the first time, the KDB is now OECD-approved, offering greater assurances to the major tech companies, in particular, which were looking for assurances that Ireland’s corporate tax rate was not about to alter significantly, despite international pressure.
With the OECD-approved KDB now in place, Noonan said, it makes it the only one of its kind in the world and “puts Ireland in a unique position to offer long-term certainty to innovative industries planning their research and development investments”.
The KDB was first introduced in Budget 2015 by Minister Noonan as a means of closing the ‘double Irish’ loophole that saw foreign companies benefit from being based in Ireland, but paying little-to-no actual tax in the country.
With OECD approval, however, any foul play from companies will be heavily scrutinised by the international community, which should prove interesting in the year to come.
This, Minister Noonan said, would be done with a country-by-country reporting structure in the national finance bill to increase international tax transparency.
In the meantime, IDA Ireland has released an infographic aiming to explain the benefits of the KDB to Ireland.
R&D image via Shutterstock