By Emma Lewis, Myriad Associates Ireland
Ireland’s new digital gaming tax credit has now been approved by the European Commission.The €20 million tax credit scheme has been in the pipeline for a while and is aimed at supporting digital games design that specifically promotes Irish or European culture.
What is the digital gaming tax credit?
First introduced as part of the 2021 Budget, the digital gaming tax credit is all about encouraging digital audiovisual projects thatenrich the Irish and wider European cultural landscape. Similar toR&D Tax Credits, it’s a generous tax relief offering up to 32% of eligible development costs back from Revenue.
Companies can either claim the relief annually, or once the game is finished and marketed.
What type of game will be eligible for the digital gaming tax credit?
In order for a company to claim the digital gaming tax credit, it must have developed a digital game that integrates some form of digital technology and be published on an electronic medium. This could be a games console or handheld device for instance.
There must also be interactivity involved (or at least incorporate three or more of the below):
- Animated images
- Still images
Where qualifying costs have been incurred in producing and testing the video game, these can be included in a claim too.
What companies can apply for the digital gaming tax credit?
The digital gaming tax credit scheme is open to any company that’s based in Ireland. However, a claim can also be made if the company is registered in the EEA and operates in Ireland via a branch or agency.
In order for companies to claim the digital gaming tax credit,certification must be obtained from the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media. Judgements will be made on elements like:
- The amount of development work on developing the game that was undertaken in Ireland or the EEA
- How much of the development work was carried out by Irish or EEA nationals
- Whether thesound effects and musicincluded in the game were created in Ireland or the EEA
- How much Irish or European culture the game includes within its content/storyline. Setting, language and characters are particularly important here
- The extent to which the game considersissues like sustainability and climate change
- How educational the game is, particularly if it’s aimed at children. For example, to what extent have themes ofequality and diversity been tackled.
Two types of certification
As part of the process of claiming the digital gaming tax credit, companies will be issued with either:
- An interim certificate:Where the game is still being developed
- A final certificate:Where the game is finished and ready for market
How do companies in Ireland benefit from the digital gaming tax credit?
The digital gaming tax credit is designed to be offset against any corporation tax liability that the company has for that particular accounting period. If the credit is worth more than a company is due to pay in Corporation Tax, or if the company doesn’t owe any Corporation Tax at all, the differencewill be paid out as a cash credit.
Once a company holds an interim certificate, it then has 12 months to claim the digital gaming tax credit. This means 12 months from the end of the accounting period during which the qualifying expenditure was made.
Company X has a year-end of 31st December 2022. It has incurred eligible costs on the development of a digital game between the1st January 2022 and 31st December 2022. Company X must therefore submit their claim for digital gaming tax credit by the 31st December 2023.
Only companies that hold a final certificate can make a final claim. Bear in mind though that any amounts received while the company held only an interim certificate must be deducted. The overall credit can also only amount to a maximum of €8,000,000.
When would a company not be able to claim the digital gaming tax credit?
In certain circumstances companies in Ireland won’t be eligible to make a claim. Reasons for this include:
- The digital game is being created for the purposes of marketing, advertising or gambling
- The company doesn’t currently have either an interim or final certificate
- The company holds an expired interim certificate and no final certificate has been issued.
I’m looking to claim digital gaming tax credit. What documentation do I need?
One of the most important ways of achieving the digital gaming tax credit is by keeping accurate, up-to-date records of relevant expenditure. This acts as evidence and is something Revenue will expect to see.
When putting your claim together, it’s well worth also seeking support from an R&D tax and funding consultancy. They will help you focus on what Revenue are really looking for, including all your relevant costs so that your claim can be maximised.It’s all about persuading Revenue of your eligibility.
Further guidance around the digital gaming tax credit is expected to be issued by Revenue shortly.