Pearse Doherty (Donegal, Sinn Fein)
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494. To ask the Minister for Finance the percentage of the research and development activity subsidised by the State through the research and development tax credit that is conducted outside of Ireland; and if he will make a statement on the matter. [58935/25]

Pearse Doherty (Donegal, Sinn Fein)
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495. To ask the Minister for Finance if construction of a qualifying building is required to be within the State in order to be relevant expenditure for the research and development tax credit; and if he will make a statement on the matter. [58936/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 494 and 495 together.

The R&D corporation tax credit, as provided for in Section 766C Taxes Consolidation Act (TCA) 1997, is available to companies which are within the charge to Irish corporation tax, and which incur expenditure on qualifying R&D activities. The tax credit is currently available at a rate of 30% (increasing to 35% in Budget 2026) on expenditure incurred by the company wholly and exclusively in the carrying on by the company of R&D activities.

The company must undertake qualifying R&D activities in the European Economic Area (EEA) or the UK; however, expenditure incurred on such activities must be allowable for the purposes of tax in the State as a deduction in computing income from a trade or, in respect of expenditure incurred on machinery or plant, qualify for a capital allowances under Part 9 TCA 1997. In the case of an Irish tax resident company, the expenditure must not qualify for a deduction for the purposes of tax in another territory.

There are two provisions providing that a company may claim the R&D corporation tax credit in respect of R&D activities subcontracted to, and carried out by, third parties, subject to certain limits. If a company pays a sum to a university or institute of higher education to carry on qualifying R&D activities on behalf of the company in the EEA or the UK, the company can claim an R&D tax credit in respect of this expenditure. Similarly, if a company pays a sum to another person (not to a university or institute of higher education) who is not a connected person, in order for that person to carry out qualifying R&D activities for the company, the company can claim an R&D tax credit in respect of that expenditure. In either case, the amount of the R&D expenditure available for inclusion in the R&D tax credit claim is restricted to 15% of the amount of expenditure incurred by the company itself on qualifying R&D activities or €100,000, whichever is greater. The company must also have incurred at least the same level of expenditure in the carrying on by it of qualifying R&D activities.

The purpose of these outsourcing limits is to facilitate collaboration and knowledge-transfer with third-level institutions in Ireland, the EEA and UK and to enable Irish R&D projects to access specialist equipment or other resources that are not available in-house, or in Ireland, to progress their R&D activities. The limits ensure that the level of outsourcing is controlled, to maintain the R&D tax credit’s focus on creating real substance and high value employment in Ireland. The outsourcing provisions also enable collaboration with Irish third-level institutions and with other Irish companies to which elements of a project may be outsourced.

Due to the qualification conditions for the credit it is expected that qualifying R&D activities undertaken outside Ireland would primarily occur through the sub-contracting provisions, subject to the limits set out above. I am advised by Revenue that statistical information is not available in respect of the location of subcontracted R&D activities carried out by third parties on behalf of companies within the charge to Irish tax, as this information is not required to be returned by companies in their corporation tax returns. It is therefore not possible to ascertain the percentage of R&D activities on which the credit is claimed that are carried out outside the State.

In relation to the Deputy’s query on expenditure on the construction of a qualifying building, Section 766D TCA 1997 provides for an R&D corporation tax credit for expenditure on buildings or structures at a rate of 30% (also to increase to 35%) on relevant expenditure.

‘Relevant expenditure’ is defined in section 766A TCA 1997 as meaning expenditure incurred by a company on the construction of a qualifying building, which is a building or structure to be used for the purpose of the carrying on by the company of R&D activities in the EEA or the UK. To be relevant expenditure, the expenditure must also qualify for an industrial buildings’ capital allowance under Part 9 TCA 1997. Where the expenditure is incurred by an Irish tax resident company, the expenditure must not qualify for a deduction for the purposes of tax in another territory. The tax credit is available for new expenditure incurred by the company on the construction, including refurbishment, of a building or structure, where the qualifying R&D activities carried on by the company in that building or structure over a period of four years represents at least 35% of all activities carried on in the building or structure in that period.

The R&D tax credit may be clawed back if the building or structure is sold within 10 years of the accounting period in which the credit is claimed or ceases to be used by the company for the purpose of R&D activities or for the purpose of the same trade that was carried on by the company at the start of the four year period and to which the R&D activity was related.