Technology The Government has introduced a tax credit in the Budget for companies that undertake new research and development (R&D) activities in the State.
It will also eradicate stamp duty on intellectual property transfers between firms, in an attempt to create a stronger research culture in the Republic.
Both taxation measures were welcomed last night by lobby groups representing the technology industry, and the development agency, IDA Ireland. The new tax credit on R&D means that from next year, companies will be able to offset up to 20 per cent of their expenditure on incremental projects against their annual corporation tax bills.
The measure, which will be subject to approval by the European Commission, is intended to encourage Irish-based companies to undertake R&D activities.
The new tax credits for incremental investments in R&D was one of the key measures sought by technology firms in the lead-up to the budget. The Republic has a low ranking against other developed countries in terms of government spending on R&D, and lobby groups for the technology industry argued a tax credit could stimulate industry.
Mr Brendan Butler, director of IBEC lobby group ICT Ireland, welcomed the 20 per cent tax credit. But he said the fact that it was only available for incremental R&D projects meant the measure should be seen as a first step.
The Minister for Finance, Mr McCreevy, said the new R&D tax credit scheme would be reviewed after five years and was still subject to EU clearance.
Meanwhile, Mr McCreevy said that transfers of intellectual property between firms would be exempt from the current 9 per cent rate of stamp duty. This was a key measure sought by the IDA, which is seeking to encourage overseas companies to set up R&D facilities in the Republic.
The agency believes the current 9 per cent stamp duty, which is levied on firms that transfer intellectual property, is undermining the State's competitiveness for R&D projects. This was particularly a factor for multinational firms that have to transfer intellectual property to Irish subsidiaries.
An IDA spokesman said a full assessment of the new measures would have to await publication of further details, which are expected in the Finance Bill.
