Taxes Consolidation Act 1997 section 769G

Interpretation and general

Section 769G defines the terms and provides rules for interpreting the knowledge development box (KDB) provisions in Chapter 3A of Part 29.

• A qualifying asset is intellectual property (a computer program or a patent-protected invention) other than marketing-related intellectual property, which results from research and development activities. Qualifying expenditure is R&D spending incurred wholly and exclusively in an EU/EEA member state that leads to the development, improvement or creation of a qualifying asset, being revenue deductions or expenditure on plant and machinery.
• Qualifying expenditure does not include acquisition costs, interest, amounts paid to group members for R&D, amounts exceeding arm's length prices under cost-sharing arrangements, margins retained by group members on third-party outsourcing, or amounts deductible for tax purposes in another territory. Qualifying expenditure can include payments for R&D outsourced to an unconnected party anywhere in the world.
• A specified trade is a trade (or part of a trade) that is not an excepted trade and consists of managing, developing or exploiting intellectual property, carrying on R&D leading to intellectual property, or selling goods or supplying services that derive value from those activities. A relevant company is one that carries on a specified trade and is within the charge to tax in the State.
• Overall income from a qualifying asset includes royalties, embedded royalties in sales proceeds (net of VAT and duty), licence fees, and insurance or compensation receipts, where taxable as trading profits. Where a product or service derives only part of its value from a qualifying asset, the income must be apportioned on a just and reasonable basis using transfer pricing methodologies such as a notional royalty or residual profits approach.