Ireland Knowledge Development Box (KDB)

Ireland's Knowledge Development Box (KDB) is an OECD-compliant corporation tax incentive for companies that earn income from qualifying intellectual property created through qualifying R&D. It was introduced by Finance Act 2015 for accounting periods beginning on or after 1 January 2016, and the relief is currently extended for accounting periods commencing before 1 January 2027.

Mechanically, the KDB reduces the taxable amount of "qualifying profits" from qualifying assets. From 1 October 2023, the deduction is 20% of qualifying profits, which produces an effective tax rate of 10% when applied against Ireland's 12.5% trading rate. For accounting periods up to 30 September 2023, the deduction was 50%, producing a 6.25% effective rate.

Qualifying assets include copyrighted software and patented inventions, and for smaller companies can include certain inventions certified as patentable (but not patented). The benefit is calculated using an OECD nexus fraction, so the effective relief generally increases with the proportion of qualifying R&D expenditure incurred by the claimant company.

The KDB claim is made through the corporation tax return (CT1) and is an election that is generally made on an asset-by-asset basis. Revenue guidance sets a general 24-month time limit after the end of the relevant accounting period to make or amend a KDB claim. For multinational groups within scope of the Pillar Two 15% minimum effective tax rate, the practical cash benefit of KDB can be reduced by top-up tax under Ireland's Pillar Two rules.