Innovation Monitor 2019 | R&D & tax incentives - KPMG Ireland
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Innovation Monitor 2019

Insights into innovation and R&D in Ireland

Gap in understanding

Our 2019 Innovation Monitor report examines attitudes to innovation and research in Ireland. Conducted by Red C Research, it gauges opinion amongst a sample of 100 Irish business leaders in receipt of research, development and innovation grant funding from Enterprise Ireland.

Findings show that better awareness and understanding of the R&D tax credit in Ireland is needed to encourage further R&D activity in Ireland. Survey respondents indicated a level of confusion in relation to the qualification criteria, application processes, value, scope of eligible activity and expenditure covered under our R&D tax credit system.

Has your company claimed an R&D tax credit in Ireland since this was introduced in 2004?

Has your company claimed an R&D tax credit in Ireland since this was introduced in 2004?  Yes 55% / No 45%

Government targets

The Irish Government has set a target for total investment in R&D in Ireland to reach 2% of GDP (2.5% of GNP) by 2020. This is supported with substantial investment from the state, including through Enterprise Ireland, with direct supports in Research, Development & Innovation and indirect supports in the form of R&D tax credits. A 2016 Department of Finance review of the RDTC found that it represented a high return on investment, with an additional €2.40 spent on R&D for every €1 in tax foregone.

Damien Flanagan

We believe that some relatively straightforward and cost neutral measures could lead to an increase in the uptake of the R&D tax credit among SMEs.

Damien Flanagan, Partner, KPMG in Ireland.

Prior to this survey, were you aware of the knowledge development box incentive?

Prior to this survey, were you aware of the knowledge development box incentive? Yes 50% No 50%

Knowledge development box

Survey findings also showed that only half of respondents were aware of the knowledge development box, a tax incentive introduced by Government in 2015 providing an effective tax rate of 6.25% for income generated from intellectual property which has been developed in Ireland, and only one third (34%) of those who were aware of the scheme intended to claim the incentive in future. This again indicated a lack of awareness about the scheme, which aims to encourage companies to locate the high-value jobs associated with intellectual property creation in Ireland.

Julie Sinnamon

For Irish businesses to remain sustainable and competitive, they need to ensure that their products and processes are cutting-edge and that they are investing in R&D.

Julie Sinnamon, CEO Enterprise Ireland.

Need for change

  • The Government and stakeholders should continue to promote awareness of the R&D tax credit with a particular focus on those aspects which seem to be poorly understood, i.e. the rate applicable, the fact that it can be payable in cash, and the Revenue guidance in relation to scientific audits. A complementary campaign to raise awareness of the knowledge development box should also be undertaken.
  • Enhancing the value of the R&D tax credit to smaller companies that are not taxpaying, by paying it over one year, instead of three - accelerating the payment would entail no significant additional cost to the exchequer, other than the short-term cost of funds.
  • A wider selection of costs – perhaps more closely matching those allowable for Enterprise Ireland grant aid – should be eligible for the tax credit. This would make the R&D tax credit both more financially attractive and more readily understood.
  • Current thresholds around limitations on outsourced activity should be extended for SMEs, as many smaller companies will not have access to the resources needed to carry out all their R&D work in-house.

Get the full report

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Find out more

SMEs & innovation

More innovation could be fostered among SMEs in Ireland if there was increased awareness of the R&D tax credit.

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R&D tax credits

The R&D tax credit is a tax-based incentive that encourages investment in R&D by companies in Ireland.

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Supporting innovation

Recommendations for improving the attractiveness of Ireland's R&D tax credit scheme.

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