Billy Kelleher
Question:127. Deputy Billy Kelleher asked the Minister for Finance his plans to retain the knowledge development box beyond its scheduled sunset date of 31 December 2020; and the annual cost of this scheme. [49769/18]
View answerWednesday, 28 November 2018
Questions (127)
Written answers
The Knowledge Development Box (“KDB”) was introduced by Finance Act 2015. In general, it provides for relief from tax on the profits earned from the exploitation of patents and copyrighted software, provided they were developed through R&D carried out in Ireland. It also provides for relief for profits earned from the exploitation of other intellectual property of small companies, provided that intellectual property is certified by the controller of patents.I am informed by Revenue that a small number of companies (less than 10) with accounting periods ended on or before 31 December 2016 have claimed the KDB relief to date. The tax cost of these claims to-date is in the region of €5 million. Due to taxpayer confidentiality, Revenue cannot comment further on the size or nature of the claimant companies to date.
I would note that relief under the KDB was introduced for accounting periods ending on or after 1 January 2016. Therefore, the first corporation tax returns in which relief could be claimed were due for filing up to 23 September 2017. However, as the regime is complex and a company must make an irrevocable election into the KDB, the legislation provides that companies have a 24-month period in which to make their claim for relief. Therefore, most companies have until the end of this year to submit their claims for the 2016 accounting periods. In line with Guidelines for Tax Expenditure Evaluation published by my Department in 2014, there is a commitment to regular evaluations of tax expenditures. For expenditures with a sunset clause, evaluations are to occur in the year of expiry under the guidelines. The objective of time-limited expenditures and regular evaluations are to ensure the continued relevance of tax expenditures with regards to achieving a policy objective. These evaluations can also assess the value for money of a given tax expenditure scheme.
As the KDB was introduced for accounting periods ending on or after 1 January 2016 it has not been subject to an ex post evaluation yet. As the KDB has a sunset clause of 31 December 2020, an ex post evaluation of the relief will occur prior to Budget 2021. This allows my Department time to monitor the relief and assess its continued relevance.