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Relief for investment in digital games is in the form of a refundable corporation tax credit for expenditure incurred by certain companies from 22 November 2022 on the design, production, and testing of an eligible digital game. The relief can be worth up to €8 million for companies incurring qualifying expenditure.
What is a digital game?
A digital game is one which integrates digital technology, is capable of being published on an electronic medium, and is controlled by software that enables users to fully interact with the game.
It will be deemed eligible for the Digital Games Tax Credit if it is mainly made available to the public, developed on a commercial basis, and is not produced for advertising or gambling purposes.
The credit is available to companies that are resident in the EEA and carry on a business in Ireland developing digital games. To qualify for the relief, companies must incur a minimum qualifying development expenditure of €100,000.
Companies seeking to qualify for the tax credit must obtain a Certificate of Approval from the Department of Tourism, Culture, Arts, Gaeltacht, Sports and Media. When considering a claim for approval, the Department will consider, among other things, the likely contribution the game is expected to make to the promotion and expression of Irish and European culture.
This approval can be in the form of an interim certificate for companies who are in the process of developing the game, or a final certificate for companies who have completed game development. Once a certificate has been obtained, companies can claim the credit in their annual corporation tax return. The claim must be made within 12 months of the end of the accounting period in which the expenditure giving rise to the claim is incurred.
Value of the relief
The tax credit available is capped at a maximum of 32% of the lowest of:
- Total eligible expenditure in Ireland or the EEA
- 80% of total qualifying expenditure (incurred worldwide), or
- €25 million.
Qualifying expenditure relates to the costs associated with the design, production, and testing of an eligible game including employee costs, capital expenditure, software, copyright, leasing equipment and subcontracting costs (net of any grant assistance).
Where a claim for the Digital Games Tax Credit has been made, the corporation tax liability of the company will be reduced by the credit. Any excess that remains will be paid as a cash refund to the company.
Interaction with other tax credits?
A standard corporation tax deduction is available on the expenditure incurred in addition to the tax credit. However, the Digital Games Tax Credit cannot be claimed on expenditure in respect of which R&D tax credits, Knowledge Development Box claims, and Film Tax credits have been claimed.
At Grant Thornton, our experienced Tax Incentives team can guide you through the claim preparation process. Please contact our expert team or your usual Grant Thornton contact for additional information on the Digital Games Tax Credit.