About R&D Tax Credits in Ireland
R&D tax credits in Ireland offer innovative businesses a 30% credit on all qualifying R&D expenditure (This is increasing to a 35% credit for the accounting periods ending 31 December 2026).
This credit is in addition to the normal 12.5% corporate tax deduction, resulting in a 42.5% benefit for R&D activities.
Qualifying R&D Businesses
To qualify for the Revenue’s R&D tax credit incentive, a company must fulfil the following criteria:
- Be within the charge to Irish tax
- Undertake qualifying R&D activities within the European Economic Area (EEA) or the UK.
- Any R&D expenditure cannot qualify for tax relief in another territory
Qualifying R&D Tax Credit in Ireland Activities
A business creating new materials, products, processes, systems, or services through research and development can qualify for Ireland’s R&D tax credit only if their activities meet these conditions:
1. Systematic, Investigative or Experimental Activities
Activities must be conducted in a planned, logical sequence with proper documentation throughout the R&D project lifecycle.
2. In The Field of Science or Technology
Qualifying R&D typically involves natural sciences, engineering, technology, medical sciences, agricultural sciences, or related fields.
3. Fall Within One of Three Research Categories
The research carried out must be either basic, applied or experimental.
- Basic (Fundamental) Research: Experimental or theoretical work aimed at increasing scientific or technical knowledge without immediate commercial application.
- Applied Research: Research directed towards a specific practical aim or objective.
- Experimental development: Systematic work based on existing knowledge, aimed at producing or improving materials, products, devices, processes, systems, or services.
4. Seek Scientific or Technological Advancement
The project must aim to advance scientific or technological knowledge beyond what is currently known or available, not just improve the company’s own internal understanding.
- If a competent professional could easily solve the problem, it does not qualify.
- Attempts that don’t fully succeed or even fail may still qualify if they seek advancement.
5. Involve the Resolution of Scientific or Technological Uncertainty
At the project’s outset, there should be uncertainty about:
- Whether the desired goal is achievable.
- Which methods or approaches will successfully meet the goals, including considerations such as budget or production constraints.
Qualifying R&D Tax Credit Costs
The tax credit is available in respect of expenditure incurred wholly and exclusively in the carrying on by the company of qualifying R&D activities. Costs can include:
Staffing
Only the portion of employee costs reflecting the actual time spent on qualifying R&D activities can be claimed. This includes salaries, pensions, bonuses, and benefits like health insurance.
- Claim the percentage of emoluments that matches time spent on R&D (e.g., 50% R&D time = 50% of costs (From periods ending 31 December 2026, where an employee spends 95%+ of their time on qualifying R&D, 100% of their emoluments qualify)).
- Applies to employees directly engaged in carrying out R&D work.
Employee Secondment
Costs for staff seconded from other organizations can qualify if:
- They perform qualifying R&D activities in Ireland.
- They bring specialist R&D knowledge not available within your company.
- Their work directly supports your R&D projects.
Individual Consultants
Costs for agency or contracted staff may qualify when they provide specialist R&D expertise unavailable in-house. To qualify:
- They must work on-site, under your direction and control.
- Their engagement must be less than six months.
- Their role is focused on R&D activities requiring specialist knowledge.
Subcontracted R&D (Third Party / Higher Education)
Payments to external contractors, consultants, universities, or higher education bodies can be included, subject to limits and conditions:
- Capped at the greater of €100,000 or 15% of your company’s own qualifying R&D spend.
- Must notify Revenue in writing before the subcontract begins.
- Requires a minimum in-house qualifying R&D spend to balance the claim.
Rental
Rental expenses can be claimed when the rented premises are integral to the R&D activity.
- For example, a dedicated laboratory qualifies.
- If premises serve multiple functions, only the R&D proportion of rent can be claimed.
- General office or shared spaces do not qualify.
Materials and Consumables
Covers items used up or transformed in the R&D process.
- Includes raw materials, utilities (e.g., electricity, gas), and consumables used in experiments, tests, or prototypes.
- Costs must be reduced for any portion sold, reused, or used outside R&D.
- Where materials serve multiple purposes, costs must be apportioned accordingly.
Cloud Computing and Software Licences
Costs qualify only when incurred wholly and exclusively for R&D activities.
- Covers cloud infrastructure, software licences, development tools, and platforms supporting R&D.
- If used partially for non-R&D work, costs should be apportioned fairly.
- Must be clearly linked to qualifying R&D projects and justifiable.
Capital Expenditure Costs
Two main categories qualify under capital expenditure:
Plant and Machinery
- Must also qualify for capital allowances.
- Costs apportioned over the useful economic life based on R&D use.
- Can be fully or partially dedicated to R&D activities.
Construction or Refurbishment of Buildings
- At least 35% of the building must be used for qualifying R&D.
- Costs apportioned if used partly for other purposes.
- Clawback applies if R&D stops or building is sold within 10 years.
How is R&D Tax Credits In Ireland Paid?
From 1 January 2023, the R&D tax credit is calculated at 30% of qualifying expenditure. The company must choose how to receive the credit, and then Revenue will pay the credit out in three annual instalments.
Choose Payment Method
- Treat all or part of the credit as an overpayment of tax, offsetting it against current or future corporation tax liabilities.
or
- Receive a cash payment from Revenue (this is available only if the company is in a loss position or has no corporation tax liability to offset).
Three Year Payment Breakdown
Year 1
Greater of the fixed threshold:
- €50,000 — accounting periods prior to 1 January 2025
- €75,000 — accounting periods commencing on or after 1 January 2025 and ending before 31 December 2026
- €87,500 — accounting periods ending on or after 31 December 2026
or 50% of the total R&D tax credit.
Year 2
60% (or three-fifths) of the remaining balance of the credit.
Year 3
The final remaining balance after the first two instalments.
Additional Details
- Claims are made through the Corporation Tax Return (Form CT1) for the period the R&D spend occurred.
- Claims must be submitted within 12 months after the end of the accounting period.
- Expenditure already relieved under other schemes (e.g., capital allowances) cannot be claimed.