Can You Claim R&D Tax Credits for Work Done Outside Ireland?

For Irish companies, operating internationally can come with great cost benefits, particularly for SMEs looking to cut expenditure wherever possible. However, one question comes up repeatedly: can you claim R&D tax credits for work performed outside Ireland?

The short answer is yes… but with important conditions. Understanding these rules is crucial if you use contractors abroad, have staff in other jurisdictions, or collaborate with international partners.

The Core Principle: Irish Tax Residence Matters

Ireland's R&D tax credit scheme is available to companies that are tax resident in Ireland and subject to Irish corporation tax. If your company is Irish tax resident and incurs qualifying R&D expenditure, you can potentially claim relief, so long as you meet Revenue’s definition of R&D.

The basic criteria for a company to qualify, as described in Revenue’s R&D Tax Credit Manual, are as follows:

• the applicant must be a company
• the company must be within the charge to Irish tax
• the company must undertake qualifying R&D activities within the European Economic Area (EEA) or the UK
• in the case of an Irish tax resident company, the expenditure must not qualify for a tax deduction under the law of another territory

As you’ll note, the R&D activities must be carried out in Ireland, the EEA or the UK. This underscores all of the eligible R&D costs that you claim.

Claiming for Staff Based Abroad

Many Irish companies employ staff or contractors in other countries. The good news: you can claim R&D tax credits for these employees, provided that they are in Ireland, the EEA or the UK.

Direct employees on your Irish payroll working abroad are generally claimable. If you have a software developer based in Portugal who's on your Irish company's payroll, their salary costs spent on qualifying R&D activities can be included in your claim. The key is that they're employed by your Irish entity and their costs flow through your Irish accounts.

You can claim for your staff’s ‘emoluments’, which includes pension contributions, bonus payments, health insurance and any other expenses operated through your PAYE/PREM payroll system.

Time apportionment still applies. Just as with Ireland-based staff, you can only claim for time actually spent on R&D activities. If your remote developer spends 70% of their time on qualifying R&D work, you claim 70% of their employment costs.

Good record-keeping becomes even more important with international staff. Keep clear records showing what R&D projects they worked on, how their time was allocated, and evidence that their work addressed genuine technological uncertainties. Timesheets, project management tools, and technical reports are your friends here. You’ll need, of course, their payslips and contracts.

Subcontractors and External Providers

Using subcontractors abroad introduces additional complexity. Irish R&D tax credit rules allow claims for subcontracted R&D, but there are restrictions. Again, only companies based in Ireland, the EEA and the UK can be claimed for.

It’s worth noting that the manual is somewhat obscure on whether the subcontracted company AND the person carrying out the R&D must be based in these qualifying territories, but it’s better to err on the safe side and assume both. If you subcontract a UK company to carry out development, but their staff is based in Pakistan, you should not claim for this, as the guidance states that the work must be “undertaken” in Ireland, the EEA or the UK.

Subcontractor costs are claimable when you engage another company or institute of higher education to perform R&D work on your behalf.

Subcontracted companies can be included in your claim, so long as the company and the R&D is carried out in Ireland, the EEA or the UK. The same goes for institutes of higher education or universities.

Externally Provided Workers (EPWs) or “agency staff” are treated the same as subcontractors. Basically, anyone who is not paid directly by the company can be claimed if they are in Ireland, the EEA or the UK.

Individual consultants who are hired part-time or on a short-term basis can be included in staff costs, not as EPWs, so long as they:

• work under the company’s control
• work on the company’s premises
• provide specialist knowledge that cannot be supplied in-house
• do not work for the company for more than six months

They are required to work on the company’s premises, wherever that may be, so long as the core criteria for the activities are met (i.e., in Ireland, the EEA or the UK and not qualifying for another tax deduction abroad).

Looking Closer at Eligible Territories

R&D Conducted in the UK

The UK is a common location for Irish companies to have subsidiaries, contractors, or staff. From an Irish R&D tax credit perspective, UK location doesn't create obstacles, as the same principles of eligibility apply.

If your Irish company contracts a UK firm for R&D work, those costs can be claimed. If you employ staff in the UK through your Irish entity, their R&D-related salaries can be claimed.

One consideration: if you have a UK subsidiary performing R&D, that subsidiary might be claiming UK R&D tax relief on the same activities. You need to ensure there's no double-dipping. The Revenue manual specifies that the R&D activities must not receive a tax deduction under the law of another territory.

EU and EEA R&D Activities

Activities in EU member states or in the European Economic Area (EEA) follow the same logic. They are claimable, so long as there is no conflict with qualifying for a tax deduction abroad.

Some practical scenarios:

Scenario 1: Your Irish company hires a contractor in Poland to develop a novel algorithm. You pay them directly, and they work to your specifications to solve a defined technological uncertainty. This is claimable.

Scenario 2: You have staff employed through your Irish payroll working remotely from Spain. Their time spent on qualifying R&D projects is claimable, with proper time apportionment and documentation.

Scenario 3: Your Irish company has a subsidiary in Germany that performs R&D for its own products. The subsidiary bears the costs. The subsidiary would claim in Germany; your Irish company cannot claim for their expenditure.

R&D Further Abroad

Unfortunately, R&D carried out outside of Ireland, the EEA or the UK cannot qualify. Many companies outsource their work abroad for cheaper rates, but these cost savings may not make sense when they cannot be included in your R&D claim.

Companies choosing to hire developers in India or the Philippines, for example, should do a cost comparison; higher upfront costs for developers in the EU could be made more reasonable if 30% can be claimed back (or 35% after recent changes in Budget 2026!).

What You Need to Document

When claiming for international R&D activities, Revenue will scrutinise these claims carefully. You need to demonstrate:

• Clear evidence of payment: Bank transfers and invoices showing who paid for the work
• Project documentation: Technical reports explaining what R&D was performed and why it qualified
• Employment or contractor agreements: Proof of the relationship between your company and the individuals performing the work
• Time allocation records: Evidence showing what portion of time or costs related to qualifying R&D activities

Contemporaneous documentation is crucial. Don't wait until you're preparing your claim to piece together what happened months earlier. Keep project notes, technical logs, and timesheets as the work progresses.

The Bottom Line

Irish companies can claim R&D tax credits for qualifying work performed in Ireland, the EEA and the UK, whether by direct employees, subcontractors, or other arrangements.

The essential requirements remain: your Irish company must bear the cost, the work must meet Ireland's R&D qualifying criteria, and you must maintain proper documentation. The location of the work matters far less than the nature of the work, who pays for it, and how well you can demonstrate it meets the scheme's requirements. With proper planning and documentation, these activities can form a legitimate and valuable part of your R&D tax credit claim.

If you have any questions on claiming for foreign costs, please get in touch with our experts.