Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I have a short note which I will read and then I will answer some of the specific questions raised. This section amends sections 766, 766A, 766C and 766D of the Taxes Consolidation Act 1997, which relate to the research and development corporation tax credit regime. The purpose of the amendments is to maintain Ireland’s support for quality employment and investment in research and development and encourage new claimants and companies undertaking smaller research and development projects to engage with the regime. The rate of the research and development corporation tax credit is being increased from 25% to 30%. This increase will ensure that the net benefit of the tax credit is maintained for companies that are subject to the new 15% minimum effective tax rate and will provide a real increase in the value of the credit to companies outside the scope of the new Pillar 2 rules. I am also increasing the first year payment threshold from €25,000 to €50,000. This means the first €50,000 of an research and development corporation tax credit can be paid in full in the first year of the claim rather than being spread over the normal three-year payment window. This will be a valuable cash flow support to companies engaged in smaller research and development projects. These changes maintain the Government’s focus on enterprise supports for productive and innovative businesses in the State.

This section also provides for some administrative and technical changes to the research and development corporation tax credit regime. The first of these is the introduction of a new pre-filing notification requirement which will apply to companies claiming the research and development corporation tax credit for the first time and companies that have not filed a claim in the previous three years. The purpose of this pre-notification is to enable resource planning in Revenue to facilitate efficient processing of claims. In addition, there are a number of technical amendments following on from the introduction of new payment mechanisms in last year’s Finance Act to align with international tax changes.

These amendments clarify the position in relation to certain apportionments of costs and Revenue’s ability to examine claims; provide for the treatment of research and development credit where a successor company continues the trade and activities of a research and development company; and provide for additional reporting requirements in respect of carried forward research and development tax credits.

As to why the percentage is being increased, under the existing regime Irish corporation tax is in the form of a tax credit while under Pillar 2 it as regarded as a grant so, in effect, is taxable. In order to maintain the same net benefit, the increase from 25% to 30% is required.

On the payment to PhD researchers, the Minister for Further and Higher Education, Research, Innovation and Science, Deputy Harris, recently announced an increase in the PhD stipend provided by the competitive funding agencies under his Department to €22,000 per student per annum. This represents an increase of €3,000. He has said the Government remains committed to getting to €25,000. We have gone from €19,000 to €22,000, and the Minister is on record as saying that he hopes to finish the job by getting to €25,000 in subsequent budgets.