Ireland: Domestic Corporate Taxation
Calculation of Taxable Base
Substantial capital allowances are available to many Irish companies, including:
- An annual 'wear and tear' allowance of 12.5% over eight years is given on plant, machinery and equipment;
- So-called 'free depreciation' allowances of 100% are available to companies in the Shannon Free Zone and the International Financial Services Centre;
- Profits on disposal of plant and equipment over w.d.v. are allowable in full;
- Hotels can be depreciated under the 'wear and tear' regime as above; other industrial buildings at 4% (not offices and shops unless they are in 'urban renewal zones');
- 100% capital allowances are available on seven categories of 'energy efficient' equipment.
The allowances described apply to cost after deduction of Irish Development Authority and other Government subsidies (except for food processing plants).
Loss relief, group relief and consortium relief are available, and broadly speaking follow the UK rules. The companies involved all need to be resident in Ireland.
The Irish Finance Act 1991 implemented the EU parent/subsidiary directive; ie an Irish company with a 10% or greater holding in an EU company can deduct tax paid (or to be paid) on dividends, but only up to the amount of the Irish tax which would have been payable.
Research and Development expenses, including capital expenditure, for scientific research may be charged against trading income in the year in which such costs are incurred. A 25% tax credit is available for increases in R&D expenditure in addition to deductions or capital allowances for R&D expenditure, resulting in a cumulative benefit of up to 37.5% . The 25% credit is set against any increase in expenditure over the average for the three previous years, but for expenditure incurred in tax accounting periods, a single base period applies, which is the relevant period beginning in 2003.
The credit is available for R&D carried out anywhere in the EEA, provided no relief has been claimed in another country. The R&D must be carried out in-house, but an amount of up to 5% of the total expenditure qualifies for the credit where the money was paid to a university or institute of higher education. The tax credit may be carried forward indefinitely where profits are insufficient to absorb it in the year of the expenditure. It can also be counted towards group relief.
From January 2012, the outsourcing limits for sub-contracted R&D costs were increased to the greater of 10% (or 5% as appropriate) or EUR100,000.
The Finance Act 2009 introduced a 'start-up' relief on up to EUR60,000 of tax due during the first three years of a new trade begun in 2009 or afterwards. Firms due to pay up to EUR40,000 are exempt from corporation tax during this period, with marginal relief granted on the next EUR20,000 of tax.
An extension to the three-year tax exemption scheme for new startups in 2010 was announced in the December 2009 budget. In the 2012 budget, the exemption scheme was extended until 2014.
The December 2009 budget also expanded enhanced accelerated capital allowances for companies purchasing energy-efficient equipment to include three new categories of equipment, (refrigeration and cooling systems, electro-mechanical systems and catering and hospitality equipment), bringing the total number of categories to 10.