Knowledge Development Box in Ireland: Revenue's Reduced Rate on IP Profits

The Knowledge Development Box (KDB) is an Irish corporation tax relief for income that a company earns from certain intellectual property (IP) it has developed through research and development (R&D). Qualifying profits get a deduction, so they bear tax at an effective rate lower than the standard corporation tax charge. Revenue describes the KDB as an OECD-compliant IP regime, and it is built around a "nexus" idea: the relief tracks the share of R&D that the claiming company really carried out. This guide explains the concepts, qualifying assets, the nexus calculation in outline and what records matter, for finance and tax professionals and for company directors in Dublin and elsewhere. It is general information, not tax advice.

Two Revenue sources are used here, and they carry different dates. Revenue's KDB overview page was published on 26 November 2025. Revenue's Tax and Duty Manual Part 29-03-01 (Guidance Notes on the Knowledge Development Box) states "Document last reviewed November 2022". Where they differ, this guide says so and asserts neither as the final word. The KDB is separate from the R&D tax credit, which our guide to the R&D tax credit in Ireland covers.

Who can claim and how

According to Revenue's overview page, a company must meet three conditions: its accounting period begins on or after 1 January 2016, it earns income from a qualifying asset, and it created that asset through qualifying R&D activities. The company claims through Revenue Online Service (ROS) on its corporation tax return, and the page points to Guidance Note Part 29-03-01 for detail. The manual adds that the company must have carried out the R&D that created the asset. It says claims are made under section 769I(2) of the Taxes Consolidation Act 1997, and that elections for KDB treatment are irrevocable.

The overview page does not give an end date for the regime itself. It says the relief "has been extended to include accounting periods commencing before 1 January 2027", so check that page for any later extension before planning around a cut-off.

Qualifying assets

Revenue's overview page gives three examples of qualifying assets: a computer programme, an invention protected by a qualifying patent, and IP for small companies that the Controller of Patents has certified as patentable but that is not yet patented. The manual adds more detail:

• Computer programs, qualifying patents and IP for small companies qualify where the asset results from R&D. Certain supplementary protection certificates and plant breeders' rights may also qualify.
• Marketing IP, such as trademarks and brands, cannot be a qualifying asset.
• Short-term patents, petty patents and utility models do not qualify.
• A "family of assets" can be treated as one asset where apportioning costs or income between assets would be arbitrary (section 769H).

For small-company IP, the Intellectual Property Office of Ireland (IPOI) page on the KDB says certification is by the Controller under the Knowledge Development Box (Certification of Inventions) Act 2017, which commenced on 19 May 2017. The IPOI page describes a "small company" for KDB purposes by reference to IP income, group turnover and EU micro, small or medium-sized enterprise status, and requires the invention to have patent-like features of novelty, non-obviousness and usefulness. The IPOI page shows no date and does not describe fees, so check IPOI directly for the current application process.

The relief and the rates: what the two sources say

Revenue's overview page (published 26 November 2025) says that from 1 October 2023 a deduction of 20% of qualifying profits applies, so those profits "may be taxed at an effective rate of 10%". It says that before that, up to 30 September 2023, the deduction was 50%, giving an effective rate of 6.25%.

The Tax and Duty Manual, last reviewed in November 2022, still describes a deduction equal to 50% of qualifying profits and an effective rate of 6.25%, and does not mention 1 October 2023. The two documents therefore reflect different dates rather than a true conflict, but a reader who opens only the older manual would see superseded figures. Our suggestion: use the overview page for the current relief percentage, use the manual for the mechanics (nexus, records, definitions), and confirm both on Revenue's site on the day, because rates and cut-offs change.

The nexus approach in outline

The relief is not simply the profit from the IP. The manual sets out a formula in section 769I(1): qualifying profits equal (qualifying expenditure plus uplift expenditure) divided by overall expenditure, multiplied by the profits of the specified trade. In plain terms, the more of the R&D spend the claimant incurred itself on the asset, the more of the profit qualifies.

• Qualifying expenditure is R&D spend on the asset. The manual says it excludes interest, amounts subject to Part 8 charges and building costs, and includes unsuccessful R&D that ultimately led to the asset.
• Uplift expenditure is capped at the lower of 30% of qualifying expenditure or the sum of acquisition costs and group outsourcing costs, according to the manual.
• Overall expenditure is the denominator in the nexus formula; check the manual for its exact definition.
• Overall income is the income from the asset used in the nexus calculation; the manual says Revenue will accept a notional royalty of up to 10% for key IP of micro and small companies unless there is evidence to the contrary.

Outsourcing R&D to group companies or buying in IP lowers the nexus fraction, which is the policy point of the regime. The manual has a section headed 'Application of transfer pricing standards [section 769N]'. For the wider subject, see our guide to transfer pricing for finance and tax professionals.

How KDB differs from the R&D tax credit

The two reliefs sit side by side but do different jobs. The manual compares the KDB with the R&D tax credit and says the KDB does not require the R&D credit to have been claimed. The manual itself cross-refers to the R&D credit provision and notes that the definition of qualifying expenditure differs. A company with qualifying R&D may therefore be considering both. The credit side is covered in the guide linked at the start of this article.

Documentation and records

The manual has a part on documentation under section 769L(1), which covers family of assets and derivative works. Use the section itself and the current manual for the full list of what must be prepared and when. A practical approach: keep, for each asset, a dated record of the R&D projects and people involved, spend tracked by category (own R&D, acquisition, group outsourcing), the licence or sales data behind the income allocation, and the reasoning for any family-of-assets grouping. This is our suggestion, not a Revenue requirement.

Where the KDB sits in wider tax planning

If a group holds IP in one company and earns dividends elsewhere, other regimes may also matter, such as the treatment of foreign dividends. Our overview of the participation exemption for foreign dividends covers that separate relief. Which regimes apply together, and in what order, is a question for a qualified adviser based on the facts.

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Frequently asked questions

What does the Knowledge Development Box do?

It gives a corporation tax deduction on qualifying profits from qualifying IP, so that those profits are taxed at a reduced effective rate. Revenue's overview page shows the current deduction and effective rate with its date.

What assets qualify?

Revenue's pages mention computer programmes, qualifying patents and certified IP for small companies. Marketing IP such as trademarks and brands does not qualify.

How is a claim made?

The company claims through ROS on its corporation tax return, according to Revenue's overview page.

Why do some sources show different rates?

Revenue's older guidance note, last reviewed in November 2022, shows a 50% deduction and 6.25% effective rate, while the overview page published in November 2025 shows a change from 1 October 2023. Check the overview page for the current position.

Does the regime have an end date?

The overview page does not state one for the regime itself but refers to accounting periods commencing before 1 January 2027. Check Revenue for later changes.

Rates, cut-offs and definitions in this area change, so confirm each point on Revenue's website on the day before relying on it.