Knowledge Development Box (KDB)

Knowledge Development Box (KDB)

Knowledge Development Box (KDB)

The Knowledge Development Box (KDB) is a progressive new addition to Ireland’s corporation tax regime from 2016 onwards.

If a company is eligible to claim the KDB rate of tax, their corporation tax rate on trading profit can be reduced by 50%, from 12.5% to 6.25%.

Below we have sought to summarise some of the key points you need to be aware of:

  • The corporation tax rate for income qualifying for the relief is 6.25%.
  • The KDB applies for accounting periods commencing on/after 1st January 2016 and a claim must be made within two years from the end of the accounting period.
  • Relief under the KDB is linked to the proportion of qualifying research and development (R&D) expenditure being incurred by the Irish company as a percentage of overall group R&D expenditure on the same intellectual property (IP) asset.
  • The IP must be the result of R&D activities as defined by the R&D tax credit legislation.
  • Smaller companies will not be required to patent their IP - ‘patentable’ is sufficient.
  • The income generated from the IP must flow into the same entity that undertakes the R&D.
  • The nexus formula must be used to determine how much of the IP income qualifies for the KDB.
  • Taxpayers will be obliged to 'track and trace' and provide documentary evidence of expenditure incurred, income generated from the IP assets, and activity undertaken to generate the IP assets.

This is a new corporation tax relief and while the process for claiming it is somewhat complex, the annual tax savings could be significant.

Please contact us to commence the process of reviewing your company’s eligibility for the KDB rate of tax on its trading activities and to determine what the annual tax benefit may be.

Please note: The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.

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Warren & Partners are a boutique Irish tax and business advisory firm based in Ballsbridge, Dublin. Our experienced-team of tax advisors will create unique tax solutions for your specific business needs.

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Tom Mahon
Tom Mahon

Managing Director

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Sinead Scanlan
Sinead Scanlan

Senior Tax Manager

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