The Irish credit is 30% of qualifying expenditure, 35% where the corporation tax return filing date is on or after 23 September 2027. Qualifying expenditure is expenditure incurred wholly and exclusively in carrying on qualifying R&D activities, which is a narrower phrase than it sounds: it includes most revenue costs of the R&D itself and the plant and machinery used in it, but caps what can be subcontracted, excludes grant-funded spend and leaves out costs that merely surround the R&D. This page sets out the categories, the apportionment rules and the exclusions. Buildings have their own credit, covered on the buildings and plant page.
Cost categories that qualify
| Category | Rule | Limit |
|---|---|---|
| Revenue expenditure on R&D activities | Expenditure incurred wholly and exclusively in carrying on qualifying R&D activities and allowable as a trading deduction | None |
| Plant and machinery | Expenditure on plant and machinery used for R&D activities that qualifies for capital allowances, apportioned for other use | Apportioned |
| Subcontracted R&D to unconnected persons | Payments to a person other than a university or institute to carry on R&D on the company's behalf | The greater of 15% of the company's own qualifying expenditure or €100,000 |
| Third level institutions | Payments to a university or institute of higher education in the State or the EEA to carry on R&D | The greater of 5% of the company's own qualifying expenditure or €100,000 |
Staff and time
Emoluments of staff engaged in R&D activities, including salaries, bonuses, employer PRSI and pension contributions, are qualifying expenditure to the extent of the time spent on those activities. Revenue expects apportionment on a reasonable, documented basis; where an employee spends part of the time on R&D, only that part qualifies, and the Tax and Duty Manual warns against including administrative, managerial or supervisory time that is not itself R&D. Directors' emoluments follow the same rule.
Key employees can benefit directly: a company may surrender part of its credit to key R&D employees, who use it against their own income tax, subject to conditions including a 23% effective tax rate floor.
Contractors and subcontracted work
Where a contractor does R&D for the company, the company claims and the contractor does not, provided the company bears the cost and the work is carried on in Ireland or the EEA. The contract should show who commissioned the work, where it was performed and who owns the results.
Subcontracting is capped by reference to the company's own spend. Payments to unconnected persons to carry on R&D on the company's behalf qualify up to the greater of 15% of the company's own qualifying expenditure or €100,000, and payments to universities and institutes up to the greater of 5% or €100,000. The two caps are separate. The subcontractor must not itself claim the credit on the same work, and the company must notify an unconnected subcontractor in writing that it may not claim. Payments to connected persons for R&D are not subcontracted expenditure in the ordinary sense; group R&D is usually structured so that the entity carrying on the work claims.
The location rule applies to subcontractors too: the subcontracted activities must be carried on in Ireland or the EEA.
Materials, software and overheads
Materials and consumables used in the R&D qualify in full.
Software and cloud used in carrying on the R&D qualify as revenue expenditure, apportioned for other use. Software that is capital in nature is treated as plant and machinery.
Overheads qualify only where incurred wholly and exclusively in carrying on the R&D. Revenue accepts a reasonable apportionment of costs such as light, heat, power and consumables used in a laboratory, but not general overheads such as rent, insurance, accounting and administration. This is stricter than the UK and Australian rules, and companies moving between the regimes often overclaim overheads in Ireland.
Costs that are excluded
| Excluded | Treatment |
|---|---|
| Expenditure met by grants or State or EU assistance | Excluded to the extent met by the grant |
| Expenditure relieved in another territory | Excluded |
| Interest, rent, rates, insurance, general administration | Not wholly and exclusively on R&D |
| Buildings | Separate credit under section 766A |
| Subcontracting above the caps | The excess is not qualifying expenditure |
| Expenditure on activities outside Ireland and the EEA | Excluded |
| Expenditure after the uncertainty is resolved | Not R&D; routine development |
Illustrative example
Illustrative example. Liffey Software Limited, a hypothetical company with an accounting period ending 31 December 2025, has these costs for a qualifying project:
| Cost | Amount | Qualifying |
|---|---|---|
| Six engineers, 60% of time on the project, emoluments and employer PRSI €720,000 | €720,000 | €432,000 |
| Cloud test environments used only for the project | €40,000 | €40,000 |
| Test hardware (plant and machinery), 100% R&D use | €30,000 | €30,000 |
| Unconnected Dutch contractor for a component | €120,000 | €100,000 (greater of 15% of €502,000, which is €75,300, or €100,000) |
| University College research agreement | €60,000 | €60,000 (within the greater of 5% or €100,000) |
| Office rent and administration | €90,000 | Nil |
| Enterprise Ireland grant towards the engineers' costs | (€100,000) | Reduces qualifying expenditure by €100,000 |
| Qualifying expenditure | €562,000 |
At 30% the credit is €168,600. The contractor's excess of €20,000 and the rent are deductible for corporation tax in the ordinary way but earn no credit.
Related pages
Official sources
Educational content only, not tax advice. See the disclaimer.