Ireland Archives - Tax Natives

Digital Games Tax credit announced

6 December 2022 7:26 am Leave a Comment

Introduction

Ireland’s Minister for Finance recently formally launched the Digital Games Tax Credit.

The measure was originally provided for in Finance Act 2021 subject to commencement order and, importantly, EU State Aid approval.

The European Commission has now provided that approval and a commencement order has now been passed.

It is expected that qualifying certificate holders are able to avail themselves of the relief from 1 January 2023.

Digital Games Tax Credit – What is it?

The credit takes the form of a refundable corporation tax credit in respect of qualifying expenditure on:

the design,
production; and
testing of a digital game

The Digital Games Credit is available to digital gaming development companies that are

resident in Ireland, or
resident in the EEA and have a branch or agency in Ireland

The rate of the credit is 32% of eligible expenditure. This is capped at a limit of €25m per project. A minimum project spend of €100,000 also applies.

Qualification

There are a number of requirements that must be satisfied in order to qualify for the credit, including:

Nature of the game;
Qualifying expenditure;
Certification;
Certification types and claim period;

Nature of game

The game must be one which integrates digital technology, can be published on an electronic medium, is interactive/built on an interactive software and incorporates as least three of the following elements:

text;
sound;
still images; and
animated images

The digital game should not be produced solely / mainly as part of a promotional campaign or be used as advertising for a specific product.

Further, the game must not be produced solely or mainly as a game of skill or chance for a prize comprising money or money’s worth.

Qualifying expenditure

There is a requirement for expenditure to be incurred directly by the digital games development company on the design, production and testing of a digital game.

The categories of expenditure that may qualify for relief include:

employee related costs;
capital costs of assets used for the development of the game;
costs of renting or leasing equipment;
costs of consumable items, software, copyright and other intellectual property rights; and
sub-contractor payments subject to a €2m limit.

Certification

A company must obtain certification from the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media.

When deciding whether it will grant such a certificate then the Minister will have regard to a matrix of cultural requirements. A points system is applied in assessing the merits of the application.

Under the rules, there is a provision for the issuing of:

an interim certificate (issued to companies still in the process of game development); or
final certificate (issued to companies that have completed development of the game).

Making a claim for the Digital Games Credit

Where a company has been issued with an interim certificate then the credit can be claimed within twelve months following the end of the accounting period in which the expenditure was incurred.

Alternatively, where a company has been issued with a final certificate, the company may make a final claim after deducting any amounts that have already been received under an interim certificate.

Process for claiming relief

The Digital Games Credit is first offset against any corporation tax liability company for the relevant accounting period.

However, where there is no corporation tax liability or if the credit takes the company into a loss-making position, then the Company may make a claim for a cash refund.

If you have any queries about the Digital Games Credit or Irish tax matters more generally, then please do not hesitate to get in touch.

The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article

Crypto tax Ireland – Buying and selling crypto

17 May 2022 7:18 pm Leave a Comment

Introduction – crypto tax Ireland

Like most jurisdictions around the world, there are no specific tax rules that apply to the buying and selling crypto assets in Ireland.

Therefore, like those other jurisdictions, the tax position on the sale of crypto assets will be subject to general Irish tax law principles.

In addition, the Irish Revenue has also issued guidance in some particular areas.

This article will mainly discuss cryptocurrencies – such as bitcoin, Ethereum and Dogecoin. The position for non-fungible tokens (“NFTS”) and other digital assets might differ.

Buying cryptocurrency

As one might surmise, the purchase of cryptocurrency is unlikely to give rise to any direct tax implications. For instance, there is no stamp duty on crypto assets (as there might be on the purchase of shares, for instance). Further, it is unlikely there will be any VAT implications where we are looking at an investor or trader buying and selling crypto-assets.

However, the purchase of the cryptocurrency will be relevant for determining the base cost of the crypto when the investor decides to sell the assets.

Sale of crypto-assets by individuals

General

The Irish tax position will depend on the Irish residence position of our crypto-investor. Specifically, whether they are:

Resident for tax purposes in Ireland; or
They are not resident for tax purposes in Ireland

Irish resident individuals selling cryptocurrency

If an Irish resident individual sells such an asset at a gain then it will usually be subject to capital gains tax. This is currently 33%.

Where the disposal results in a loss, then this capital loss can generally be:

Used in the current year against other gains; or
Carried forward to future years

The position is slightly different if the person is carrying on a ‘trade’ of dealing in crypto. Here, any profit on the sale of crypto would be subject to income tax. Marginal income tax rates of up to 55% – where one includes social charges – might therefore be payable.

It is worth noting that a trading classification is only likely in exceptional cases with the trading needing to be carried out in a deliberate and commercial fashion.

Non-resident individual

A non-Irish resident individual (who is also non-ordinarily resident) is liable to Irish CGT on gains arising in Ireland from the disposal of Irish ‘specified’ assets only (e.g. land and buildings in Ireland). As such, crypto gains should not be taxable.

Sale of crypto-assets by Companies

An Irish resident company that disposes of crypto at a gain will be subject to capital gains tax at 33%. Similarly, losses will also be treated in the same way as set out above for individuals.

Where such a company conducts a ‘trade’ of dealing in crypto, then it’s profits will generally be subject to corporation tax at 12.5%.

Again, the threshold at which activities might be considered a trade is a high one. However, it is generally thought that a company might satisfy this more easily than an individual.

Mining cryptocurrencies

General

The Irish Revenue has not provided any guidance on the position when it comes to the mining of cryptocurrencies.

If they follow the UK tax authorities position on the same activity, then the treatment will depend on whether:

The person is conducting a trade of mining crypto; or
The person’s activities fall short of a trade

Trade

Here, the person will be taxable on the trading profits generated from the mining activities.

A company will pay tax at 12.5% but an individual will be subject to tax at their marginal rates.

No trade

Where the activities fall short of a trade, then the income received by the person will be treated as ‘miscellaneous’ income.

Miscellaneous income tends to qualify for fewer reliefs than trading income.