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Ireland Urged To Extend Software Industry Incentives

by Jason Gorringe, Tax-News.com, London

02 November 2006


The Irish Software Association (ISA) has called upon the government to extend its investment incentive schemes, saying that these are crucial to secure future growth of the Irish software development industry.

The ISA stated in its 2007 budget submission that it is seeking an extension of the current Business Expansion Scheme (BES) and the Seed Capital Scheme (SCS), both of which are due to expire at the end of the year, until 2013. It also wants the government to increase the limits on investments that the company can raise to EUR1.5 million (US$1.9 million), up from the existing limit of EUR1 million, and an increase in the personal investment limit to EUR250,000 per annum (from the current rate of EUR31,750).

The ISA believes this will encourage individuals to invest directly or indirectly in a range of small high-risk companies by offering income tax relief.

“Business Expansion Scheme and Seed Capital funding is particularly important for software start-ups and early-stage companies, which are finding it virtually impossible to access the financing they need in order to start, grow and, in some cases, survive," observed Michele Quinn, Director of the ISA.

According to the ISA, over 50% of software start-ups have relied on a combination of both BES and SCS funding over the past few years.

The ISA also recommended improvements to the existing R&D tax credit scheme to help small and start-up funds grow.

“If we are to continue to compete globally, we must increase the amount invested in R&D. While the ISA supports the scheme in principle, changes are needed to improve the way it operates and make it more accessible for SMEs. It is currently more suitable to larger, established, tax liability companies who are already carrying out R&D," Quinn said.

"Although the existing R&D tax credit can be carried forward indefinitely, this is of little or no benefit to companies not making taxable profits to grow their R&D activities, e.g. software companies in the development phase," she added.

Ireland's software industry currently employs some 16,000 people, but the ISA believes that the industry has the capacity to employ 50,000 and deliver revenues of EUR7.5 billion to the Irish economy by 2010.

A comprehensive report in our Intelligence Report series examining tax-sheltering arrangements for investors, including Forest Finance, Film Finance, Venture Capital, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report5.asp

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