The Technology, Media and Telecommunications (TMT) industry is one of the most important contributors to Ireland’s economy, accounting for more than half the country’s exports. The government’s low tax policies over the past two decades have become synonymous with attracting billions of euros in foreign direct investment from ‘Big Tech’, with a who’s who list of some of the world’s biggest digital firms all now based here.
The sector is not all about major multinational players taking advantage of an attractive tax regime, however. Ireland’s tech start-up scene is a hotbed of talent and innovation, with a global reputation for the quality of products and services. Ireland’s IT outsourcing market alone is worth €1.5bn. At the same time, the country’s thriving media and entertainment sector is forecast to be worth in excess of €6bn by 2026.
Just as it has done with its outward-facing policies to attract investment into these shores, the government is more than happy to use tax as a lever to encourage growth and investment in Ireland’s domestic TMT sector. Tax reliefs and allowances range from carefully targeted reliefs available in certain sub-sectors, to more general schemes designed to encourage and reward innovation.
Here are three options available to TMT companies for reducing their tax liabilities.
Film Relief
Ireland’s film, television and animation industry is worth an estimated €700m and employs close to 12,000 people. Since 2015, producer companies have been able to claim what is officially known as the Section 481 Film Tax Credit, a relief on corporation tax which has helped earn Ireland a reputation as one of the world’s most attractive production environments.
The scheme offers a 32% credit on production costs, calculated against whichever is the lowest of:
- Eligible expenditure
- 80% of total qualifying film costs
- €70m
Claiming the credit involves applying to the Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media for a cultural certificate which stands as confirmation that the production qualifies. Companies must wait until production is finished to claim the full amount, or can elect to claim 90% before production finishes.
Digital Games Relief
Ireland’s video games production industry is an up-and-coming sector, forecast to approach €500m in value by 2027. But with the global video game market forecast to be worth a massive $500bn by the end of the decade, you can understand the government’s eagerness to encourage growth in the domestic sector.
Digital Games relief is another corporation tax credit that works in a near-identical way to the Film Relief. It offers a 32% credit on video game development costs, calculated against whichever is the lowest of:
- Eligible expenditure
- 80% of total qualifying film costs
- €25m
A cultural certificate is again required via the Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media to qualify.
Knowledge development box
The Knowledge Development Box is a more wide-reaching scheme which offers corporation tax relief on profits made on innovations resulting from research and development projects. The scheme is of particular interest to the TMT sector as ‘qualifying assets’ specifically include computer programmes, as well as any invention protected by patent.
The KDB scheme offers a 20% pre-tax deduction on qualifying profits (i.e. those arising from the commercialisation of qualifying innovations), or a 10% effective tax rate. As things stand, the scheme is currently available up to the end of 2026.
Speak to an expert
Aside from the specific schemes listed above, TMT companies can boost their tax efficiency by taking full advantage of all permitted expenditure deductions and capital allowances. Contact our TMT team to speak about tax planning and other sector-focused financial management services we offer.
