Whilst we often look more broadly at the tax and other assistance programs provided by the Irish authorities for start-ups and other young businesses, it isn’t often that we dig right in sectorally, or get the opportunity to see a support system being built from the ground up.
In this blog, we will be examining the new Digital Gaming Tax Credit, first flagged up in the 2021 Budget and then fleshed out in the recent 2022 Budget.
Announcing the new credit in the Budget, the Government said: "Digital gaming is a sector that has seen exponential global growth in the past decade. However, employment growth in the sector in Ireland has not matched this global trend. The introduction of a tax credit specific to the gaming sector, allied to synergies with our established film and animation sectors, will support quality employment in creative and digital arts in Ireland."
The gaming sector in Ireland currently employs around 2,000 people. This number has been increased by the opening of a new digital gaming hub in County Sligo, creating an additional 100 jobs, spread over 20 companies. Leo Varadkar, Ireland's Enterprise, Trade, and Employment Minister, observed at the centre's opening that, "with the overall industry worldwide worth an estimated EUR300bn, there is huge potential growth".
The Government is keen to boost the sector in a similar way to the film sector, which has benefited from the Section 481 credit scheme.
Under the new Irish scheme, which will take the form of a corporate tax credit, relief will be granted on expenses incurred on the design, production, and testing of qualifying digital games. It will be available at a rate of 32 percent of eligible expenditure up to a maximum limit of EUR25m per project and there will also be a per-project minimum spend requirement of EUR100,000.
Claims are permitted for expenditure undertaken on an annual basis, meaning that developers will not need to wait until the project is completed before claiming the credit.
As the aim of the credit is to specifically encourage the production of culturally Irish, or European, games, taxpayers will be required to first obtain a cultural certificate from the Department for Tourism, Culture, Arts, Gaeltacht, Sport and Media.
Concerns have been expressed about the EUR100,000 minimum spend threshold, with some stating that this will exclude lower budget ‘home grown’ projects. Given that the credit scheme is still being developed, a change to this threshold cannot be ruled out.
The credit will not be available for digital games that are produced mainly to encourage gambling, or which have been created for the purposes of advertising.
Similar to the requirements imposed on companies that receive the Section 481 Film Tax Credit, games development companies seeking to take advantage of the new scheme will need to provide quality employment and training opportunities.
Having only recently been announced, full details regarding the application process are not yet available. However, it is expected that the scheme will be introduced in 2022 (as initially indicated in Budget 2021), and the Government has already stated that the scheme is expected to be in place until the end of 2025. However, the introduction of the Digital Gaming Tax Credit will be subject to a commencement order, as the relief constitutes notified State aid which requires European Commission approval.
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Disclaimer: This blog is intended as a brief overview of a Refresher on tax deadlines in Ireland. The blog does not represent taxation or legal advice and that independent advice should always be sought in respect of such matters etc.
