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Following countries such as Canada, France and the UK, and pending approval from the EU, Ireland is set to launch its very own Digital Games Tax Credit scheme...
“More people than not play video games… but it’s always seen as a bit of an underdog to film and TV and music.” - Craig Stephens, Imirt member & video games consultancy Kartridge
Well, not for much longer: Following countries such as Canada, France and the UK, and pending approval from the EU, Ireland is set to launch its very own Digital Games Tax Credit (DGTC) scheme.
What is the DGTC scheme? How will it work? When will it launch? And, why has Ireland decided now is the time for DGTC?
Whether you’re a game developer or a video game player, keep reading for answers to these questions and more…
Expected to launch in 2022, and subject to approval from the European Commission State Aid, Ireland’s newest tax credit will allow Irish-based video game developers to claim up to 32% of the costs associated with the design, build and testing of their video games, up to €25 million.
“The digital games tax credit will be modelled to some extent on the tax credit available to qualifying films, television drama, animation and creative documentaries pursuant to Section 481 of the Taxes Consolidation Act 1997.” – Phillip Lee
Whilst specific details surrounding things like eligible projects and expenditure haven’t been released yet, there are strong rumours that the Irish DGTC scheme has been largely modelled on the Section 481 Tax Credit incentive.
Like the new DGTC scheme, Section 481 allows creative companies to claim up to 32% of the eligible costs associated with the production of qualifying films, television dramas, animation and creative documentaries. But, to make a claim under Section 481, these creative companies must be issued with a cultural certificate from the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media.
This will also apply to the Irish DGTC scheme: Video game developers will need to pass a points-based cultural test and receive a cultural certificate from the Minister before they’ll be able to submit a DGTC claim. Whilst we don’t yet know what it’ll take to pass this cultural test, it’s expected to be similar to the culture test that’s used for film and television projects. If this is true, then games produced for advertising or gambling will not be eligible for the DGTC incentive.
“Irish digital games tax credit is likely to be closer in form and content to the culture test currently used for film and television projects.” – Phillip Lee
And, as with the Section 481 Tax Credit, companies won’t need to wait until the project is finished before they’re able to make a DGTC claim. It’s likely to follow the Section 481 guidelines, which state that 90% of the claim can be made during production if certain requirements have been satisfied, and the rest can be claimed after the project has been completed.
It’s also likely that video game developers will need to meet a set of employment criteria to make sure exploitative practices, such as unpaid overtime and precarious contracts aren’t rewarded by this tax credit incentive.
Imirt, the trade association representing the Irish video games industry, began conversations with the Department of Finance and the Department of Culture about introducing Digital Games Tax Credit back in February 2020.
The members of Imirt have found government-backed financial support for the development of video games frustratingly lacking and believe that this new tax relief incentive will:
“Nurture the talent that is already here and make sure they get the support they need to not only create the game they’re working on now, but the next game and the next game.” - Craig Stephens, Imirt member & video games consultancy Kartridge
The arrival of the Digital Games Tax Credit scheme is expected to make the industry attractive to new talent, boost Irish competitiveness, and support a growing industry.
“The introduction of the credit is not merely to encourage people to take up gaming as players. Instead, it is a well-measured and significant support to an industry with much potential.” - RTE
The global annual revenue made by the video games industry is more than $300 billion (€260 billion). This is higher than the film and music industries combined.
With the global pandemic came a renewed surge in video game popularity. For example, Nintendo’s Animal Crossing: New Horizons, which was released just before COVID hit, sold 31.18 million copies in under a year.
The scale and potential of the video games industry is phenomenal, and the Irish government can’t, and shouldn’t, ignore this fast-growing industry any longer. If Ireland were to capture just 1% of the global pot, it could make over $3 billion (€2.5 billion) in revenue.
Thanks to the introduction of the Section 481 Tax Credit scheme in 1997, employment in the Irish Film and TV sector grew from 1,000 to 12,000 between 1997 and 2019.
"The TV and Film sector now hire more than Google and Facebook combined. On a global scale gaming is by far the largest entertainment sector, double the size of tv, film and music in total.” - Barry Reid, Economist
So, it’s expected that the Irish DGTC scheme will do the same to the Irish games industry, which currently employs around 2,000 people. From overseas game developers to recently graduated students, the launch of this scheme will send a clear message to the industry: Get over here and make your video games.
“A lot of people are considering additional hires in their companies already, based on seeing that this tax credit is coming in.” - Ellen Cunningham, Imirt board member and lead game writer at Gambrinous
“A 32% rate of DGTC would, in effect, yield a 28% increase in economic benefit to Irish games company claimants.” - TIGA
The Irish government have not only decided to launch a tax relief incentive to boost the video games industry and encourage the arrival of new talent to the Emerald Isle, but they’ve also made sure it’s the most competitive scheme around. In the UK, the DGTC scheme covers only 25% of eligible expenditure and the French tax credit for video games covers 30%.
Ireland is ideally positioned to secure more of the rapidly expanding $300 billion industry. And, with the arrival of this new DGTC scheme, Ireland can finally catch up with other European countries that already provide financial support to game developers and gaming companies.
The introduction of Video Games Tax Relief (VGTR) back in 2014 transformed the UK gaming sector. It increased the sector’s contribution to the economy, generated employment opportunities and made the UK a serious contender in the video games development market.
“VGTR has been crucial in enabling the UK video games industry to compete on a more level playing field against the UK’s international competitors, particularly Canada, which benefit from generous forms of tax relief.” - TIGA
Myriad Associates has a team of specialist VGTR consultants who have been filing VGTR claims for seven years. With a 100% success rate in securing the maximum amount of tax relief possible for the design, development and testing of video games, it’s safe to say that they know a thing or two about VGTR.
They take the time to thoroughly understand the businesses they’re working with and their video game projects. From interviewing key technical staff to analysing cost reports, Myriad Associates has a right-first-time approach. And it’s this and their experience that enables them to unpick and identify all the eligible projects and costs that are likely to qualify for Digital Games Tax Credit.
For example, they were able to identify over £4.2m worth of R&D expenditure for Kuju Entertainment & Zoe Mode, who work with leading video games publishers.
With the Irish DGTC set to launch next year, now is the time to find out more. Myriad Associates has a dedicated Irish DGTC team ready to support you when you make your claim. To find out how they could help you, contact the Irish team on +353 1 566 2001 or drop us a message here.