Knowledge Development Box (KDB)

Adding to Ireland’s R&D incentives

The KDB was introduced in Budget 2016 and applies relief to income from qualifying patents, computer programs and, for smaller companies, certain other certified intellectual property (IP). A company may qualify for KDB if it has a usable qualifying asset that earns income and that was created as a result of from qualifying R&D activities.

Can we claim KDB?

Is your company undertaking R&D that results in IP or copyrighted software? Or have you been involved in new inventions that constitute value in the items you sell? Are profits realised in Ireland? Then yes, you can avail of KDB.

What is the benefit?

For profits derived from qualifying assets, or families of qualifying assets, a corporation tax rate of 6.25% will apply. Qualifying assets are certain intellectual property assets that are the result of qualifying R&D activities undertaken in Ireland. 

When is KDB Relevant?

The KDB will be applicable to financial periods beginning 1 January 2016. Now is an ideal time to build an understanding of its applicability to your business. The Gi³ team at Deloitte can assist you in this.

How is KDB calculated?

As can be seen from the formula above, the amount of profits that are applicable to the KDB can be arrived at by determining the proportion of your company’s qualifying R&D activities in Ireland and the total cost of the R&D that was required to develop that asset. 

What should I do now?

Talk to us, we have a specialist team that is ready to assist you. We can assess the potential benefits and assist you in building a robust approach and methodology. 

Considerations?

Some items to think about are:

• How do you manage and evidence the R&D activity that results in your qualifying assets?
• Are there any transfer pricing issues arising from R&D activities that are geographically distributed?
• What are the implications for country by country reporting legislation?
• Importantly, what systems and controls are required to be put in place now that will assist in identifying what profit results from each qualifying asset held?
• What changes can we make to our management of IP and R&D to assist in an accurate and robust KDB calculation? 

How we can help?

Deloitte has developed an analytical methodology to assess clients’ suitability for KDB relief and to prepare and submit their claims.

• Scaling the benefit: We will conduct a detailed assessment of IP assets and estimate the likely ongoing benefit of the KDB scheme
• Detailed calculation: By applying our extensive knowledge of KDB, R&D tax credit and transfer pricing legislation, as appropriate, we will select the most appropriate assets for inclusion in the claim and develop detailed data flows, assessments and schedules to identify qualifying income.
• Documentation: We will collate the relevant evidence into a robust KDB claim, supplemented with additional documentation that outlines the logic used and decisions made in preparing the claim.