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The introduction of a digital games tax credit has been welcomed by the gaming industry in Ireland. Keep reading to learn more about the tax credit and whether you may be eligible.
Why was the digital games tax credit introduced?
This tax relief was announced in Budget 2022 and enables companies that produce video games to receive a tax credit of up to 32% on eligible expenditure. It’s been specifically designed to help SMEs to compete with other jurisdictions on the international stage.
By introducing this tax credit relief, the government has recognized the potential for economic growth and jobs in the gaming sector. This follows in the footsteps of other countries such as the UK and Canada, who have used tax incentives to boost the gaming industry. Many other countries have had a digital games tax credit in place since the late 1990s.
It is expected that the introduction of this tax credit will provide a much-needed boost to the gaming industry in Ireland. It will enable Irish companies to develop and compete on a global scale.
Who can claim the digital video games tax credit?
Companies that are tax resident in Ireland can avail of this tax relief. They must be engaged in trading activities related to the development of digital and video games to avail of the tax credit. It’s also available to companies based within the EEA, provided they operate in Ireland through a branch and meet the eligibility criteria.
The tax credit is available on expenditure incurred during the development of a “qualifying digital game”. Some examples of the expenditure eligible for the digital games tax credit are:
-Art and animation
-Design and programming
-Audio engineering
-Marketing
-Sales
The credit is not available on salaries or wages, which provides an incentive to invest in new skills and technologies.
Qualifying Digital Games
To qualify for the gaming tax credit, the game must integrate digital technologies and be published on an electronic medium such as a games console. It must incorporate interactive features such as sound, text, still, and animated images.
How will the tax credit work?
Up to 32% of qualifying expenses for a project can be obtained, with a maximum spend of €25 million and a minimum requirement of €100,000 per project.
Developers can avail of a refundable tax credit where there is no tax liability against which to apply the credit . The maximum amount of credit that can be claimed is €8 million per project (32% of €25 million).
To claim the tax credit, you must receive an interim or final certification from the Minister for Tourism, Culture, Arts, Gaeltacht, Sport, and Media.
How To Claim the Tax Credit?
This can be claimed in the annual corporation tax return after receiving an interim or final certificate from the Minister. The claim must be made within 12 months of the accounting year end of the period to which the claim relates. Holders of this certificate will be able to apply for the tax credit from January 2023. The scheme is proposed to run until 31st December 2025.
To apply for the certificate, download the application form from Gov.ie.
This tax credit could be the beginning of a new era for the gaming industry in Ireland, which is sure to positively impact the economy and job market. This could lead to the creation of new digital games jobs in the sector and a more diverse and competitive gaming industry. At Cronin and Co, we provide a comprehensive range of taxation services to our clients. If you have any further queries, get in touch with a member of our tax accounting team today.