Global investments and innovations incentives (Gi3)

Key measures

Over the past number of budgets important changes to the R&D tax credit regime have been made to ensure that they are compliant with Pillar 2 and US foreign tax credit regulations. While no significant changes to the regime have been detailed in Budget 2025, the Minister outlined the focus of the Department of Finance’s review of the R&D tax credit, which is on ensuring that Ireland remains an attractive location for innovation and that support is provided to innovative businesses that are evolving to meet the challenges presented by increased digitalisation. The main change to business supports was seen in the increase in first year threshold of the R&D tax credit from €50,000 to €75,000.

In addition to the 8% uplift to section 481 film tax credit, applying to film productions with a maximum qualifying expenditure of €20 million, the Minister also announced the introduction of a new Unscripted Production tax credit (subject to EU approval) which will enable a 20% credit on up to €15 million of qualifying expenditure. This will be similar to other audio-visual reliefs and will require projects to pass a cultural test.

Who will be affected?

Building on an increase in Budget 2024, the budget provides for an increase in the first-year payment threshold from €50,000 to €75,000, which provides a valuable accelerated cash-flow for smaller companies with claims of less than €100,000 and for new entrants into the scheme.

For section 481 film tax credit, feature film productions with a maximum expenditure of €20 million will benefit.

When? What to do now?

No changes to the mechanisms of the R&D tax credit scheme have been announced. However, the measures noted above coupled with the rate increase outlined in Budget 2024, means that companies should benefit from increased cash flow from the incentives. It is advisable that claimants review their existing claim processes and controls. Putting correct review and documentation processes in place is critical in ensuring that the correct expenditure is identified and is fully defensible in the event of any Revenue scrutiny. With respect to the tax credit for unscripted production, further details will be announced that will set out the requirements once EU approval has been secured. 

Our view

Previous budgets were proactive from an innovation incentives perspective, where Ireland was a global leader in making changes to the R&D tax credit to bring it in line with Pillar 2 and US FTC regulations. While the introduction of the Tax credit for Unscripted Production is welcomed by that industry, Budget 2025 represented a missed opportunity to further enhance supports to business engaging in high value R&D. However, we hope to see technical amendments in the Finance Bill especially for the Digital Games Credit.

Deloitte believes that Ireland has the capacity to meet the needs of R&D investors and offers the ideal commercial, political and social environment in which to carry out successful and profitable R&D activities. We welcome the Department of Finance’s’ review of the R&D tax credit regime and strongly encourage that qualifying R&D activities should be expanded to include AI, Blockchain, Data Analytics and also Carbon Neutrality. Outsourcing of research and development to third parties is particularly common in certain industries such as the food, pharmaceutical and biotech sectors and can be of particular importance to the SME sector. The current limits on outsourced R&D activities that qualify for the R&D tax credit must be removed, this will not only bring Ireland in line with other jurisdictions but will also ensure that Ireland has a best-in-class R&D tax credit regime.