The Knowledge Development Box (KDB) is a policy introduced in the Irish Finance Act 2015 to benefit small and medium-sized enterprises from intellectual property. It is a tax incentive policy tool designed to encourage innovation in Ireland, which applies a lower corporate tax rate from 12.5% to 6.25% to profits from intellectual property assets generated from qualifying R&D activities as referred to in Section 766 of the Taxation Consolidation Act 1997.
Qualifying intellectual property assets are defined as:
- Invention Patent
- Computer programs/copyrighted software
- Inventions of small companies that can be patented but have not yet been patented and have been kept secret
Qualifying assets must be the result of research and development. Certain other intellectual property rights, such as Supplementary Protection Certificates (SPCs) and plant breeders' rights, may also be qualifying assets. However, any marketing-related intellectual property rights, such as trademarks, brands, publicity rights and other intellectual property rights used to market goods or services, cannot be qualifying assets. Short-term patents are not qualifying assets.
How can small companies obtain funding from KDB for inventions that are patentable but have not yet been patented and are kept secret?
- For the purposes of the KDB, a small company is defined as a company with intellectual property revenues of less than EUR 7.5 million in a 12-month accounting period, a company that is part of a group with a group turnover of less than EUR 50 million and a company that is a micro, small or medium-sized company as defined in the Annex to Commission Recommendation 2003/361/EC of 6 May 2003.
- Small companies’ IP assets are eligible for KDB tax relief if they are inventions that have the same characteristics as patents, i.e. non-obviousness, industrial applicability and novelty, provided that they are certified by the Director General of Intellectual Property.
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