R&D tax credits in the pharmaceutical industry

Research and development plays an important role in the pharmaceutical industry, accounting for 20 per cent of commercial R&D undertaken in Ireland. The companies operating within the sector employ highly skilled and qualified staff, and function within a highly regulated and controlled environment. However, the question in undertaking an assessment of R&D activities to be included in an R&D tax credit claim is whether the R&D activities meet the qualifying criteria that are set out in the legislation? Subsequently, are costs relating to non-qualifying activities being included in a claim and other qualifying costs being overlooked?

The qualification of some activities will be more apparent, such as the development of new: 

  • Technologies
  • Techniques
  • Materials and
  • Reagents.

Other areas, especially those around the development of generic drugs, are less apparent and are in some cases not included in the tax credit claim. It is, therefore, important to undertake a full assessment of all activities that can be included.

In view of Revenue’s increased scrutiny of claims, it is vital for companies to ensure that their tax credit claim is robust and includes only costs relating to R&D activities that meet the qualifying criteria that Revenue has set out in the legislation.

The pharmaceutical industry plays an important role in Ireland’s economy, accounting for exports in excess of €55 billion (including biotechnology and chemistry). Ireland is home to over 120 pharmaceutical companies, including nine of the world’s ten-largest pharmaceutical companies, making Ireland the eighth-largest pharmaceutical producer in the world.

Deloitte’s extensive knowledge, coupled with our experience in working with both indigenous and multinational pharmaceutical companies allows us to provide a robust assessment of the qualifying activities to be included in the R&D tax credit claim. Please don’t hesitate to contact us if you would like to discuss how to the tax credit system might benefit your organisation.

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