Knowledge Development Box (“KDB”)

The KDB is a tax relief launched with effect from 1st January 2016 that enables companies earning profits from goods and/or services that have been patented to qualify for a lower effective tax rate of 6.25%. This rate also applies to profits derived from copyrighted software, patents, or inventions which are subject to similar intellectual property (“IP”) protections.

To qualify for the KDB you must be an Irish resident company or branch which has incurred expenditure to create the underlying qualifying asset (IP) which is now being exploited and producing the applicable source of income. No relief is available under the KDB for IP which is acquired and then exploited. The qualifying expenditure on the creation of the IP is subject to the same qualification criteria as set out in legislation for R&D tax credit purposes (whether or not this tax credit was actually claimed). 

Due to the requirement of KDB that the claimant company has to have incurred qualifying expenditure on R&D, there is an inextricable crossover with R&D tax credit relief. All expenditure has to be evidenced in the same way as for R&D tax credits to show scientific and/or technical qualifying activities took place. Therefore, it makes sense to prepare detailed R&D tax credit (notwithstanding the R&D documentation requirement) to also support future KDB income relief claims on the created IP. 

We can advise on all aspects of KDB and R&D tax credit relief claims. Our guidance on R&D tax credit relief can be found here

If you would like to discuss the application of the KDB to your business please do not hesitate to contact a member of our technology team at TechTeam@MooreStephens.ie for an initial discussion.