Game development is an intricate process involving countless moving parts, from concept to launch. While most studios are aware of the Digital Games Tax Credit (DGTC) and its potential to significantly reduce development costs, some are overlooking qualifying expenditures that fall outside the obvious categories.

Understanding these "hidden" or less obvious qualifying costs is crucial for maximising your DGTC claim. A well-prepared submission can mean the difference between claiming 32% relief on just your core development salaries versus capturing the full scope of your production expenditure, potentially worth tens or hundreds of thousands of euros in additional tax credits.

Whether you're a studio director, producer, accountant, or indie developer, this guide will help you identify qualifying costs you might not have considered and ensure your DGTC claim captures every eligible euro spent on your game's development.

Quick Recap: What Is the Digital Games Tax Credit?

The Digital Games Tax Credit is Ireland's flagship incentive for game development, offering a generous 32% tax credit on qualifying expenditure. To access this relief, your project must meet specific criteria, including cultural certification and minimum spend thresholds.

For every euro of qualifying expenditure you incur directly on the design, production, and testing of your digital game, you can claim back 32 cents through the tax credit system. This can be claimed as either a payable credit or treated as an overpayment of tax (and therefore offset your tax liability).

Most developers immediately think of the obvious qualifying spend: developer salaries, art assets, and development tools. While these certainly form the backbone of most claims, the legislation actually covers a much broader range of expenditure than many realise.

Hidden or Overlooked Qualifying Costs

Beyond the obvious categories of salaries and development tools, there's a wealth of qualifying expenditure that studios often miss. The key principle is straightforward: qualifying expenditure is expenditure incurred directly by the development company on the design, production and testing of a digital game.

The legislation recognises several categories of qualifying expenditure:

• Salaries – your core development team costs
• Capital costs of assets – equipment and hardware purchases
• Renting or leasing equipment – temporary equipment needs
• Consumable items – materials used in development
• Software – development tools and platforms
• Copyrights and other intellectual property rights – licensing creative content
• Sub-contractor payments – external development work (up to €2,000,000)

Let's explore the less obvious categories that could significantly boost your claim.

Narrative and Story Development

Your game's story doesn't write itself, and the costs associated with crafting compelling narratives are absolutely qualifying expenditure. This includes fees paid to writers, script editors, and narrative consultants who contribute to your game's story development.

Whether you're working with freelance writers to develop character backstories, hiring script editors to polish dialogue, or engaging narrative consultants to structure your game's story arc, these costs qualify for the credit.

The key is ensuring these expenses relate directly to the production phase of your game, not early-stage conceptual work, which is specifically excluded.

Motion Capture & Performance Costs

Modern game development increasingly relies on motion capture technology to create realistic character animations and performances. The costs of this sophisticated production process are often substantial and fully qualify for the DGTC.

Actor performance capture sessions, including talent fees and related expenses, qualify as direct production costs. Similarly, equipment hire for motion capture technology and studio rental costs for these sessions are eligible.

Music and Sound Design

Audio is a crucial component of the gaming experience, and the costs of creating original soundtracks, sound effects, and voice acting sessions qualify for the credit. Original soundtrack composition, whether created in-house or commissioned from external composers, represents qualifying expenditure on your game's production.

Sound effect creation, voice acting sessions, and audio post-production work all contribute to your game's development and qualify for the credit. Even costs associated with recording sessions, studio hire for audio work, and audio editing services are eligible, provided they relate directly to your game's production.

Quality Assurance (QA) and Testing

Thorough testing is essential for delivering a polished gaming experience, and the costs associated with quality assurance qualify for the DGTC. This includes both internal testing teams and outsourced QA services.

Internal testers' salaries and associated costs are qualifying expenditure, as are fees paid to external QA companies. Bug tracking tools and services used during the development phase also qualify, though it's important to distinguish between development-phase testing and post-release maintenance, which doesn't qualify.

Tools, Middleware, and Engine Licensing

Development tools and engine licensing represent some of the most significant qualifying costs. Unity and Unreal Engine licenses tied to your specific production qualify, as do specialised tools like FMOD and Wwise for audio implementation.

Development plug-ins and AI tools used directly in your game's creation also qualify for the credit. The key is ensuring these tools are used specifically for your game's development rather than general studio operations. Project-specific licensing costs are eligible, while general studio tool subscriptions may not qualify.

Remote Work Infrastructure

In today's development environment, remote work infrastructure has become essential for many productions. Project-specific costs for VPNs, cloud servers, and collaboration software can qualify for the DGTC.

The crucial distinction is whether these costs are directly attributable to your specific game project. Cloud storage for project assets, project-specific communication tools, and development-focused remote access solutions all potentially qualify, provided they're used exclusively for your game's development or are appropriately apportioned.

Outsourced/Contracted Services

External development services represent a significant opportunity for qualifying expenditure. Art studios, animation houses, and localisation teams all provide services that contribute directly to your game's production.

The rule is straightforward: if the work is directly related to your game's production, it likely qualifies. This includes concept art, 3D modelling, animation work, localisation services, and other contracted development work. Remember that sub-contractor payments are subject to a €2,000,000 limit, but this threshold accommodates most external development arrangements.

Game Certification and Compliance Testing

Bringing your game to market requires various certification and compliance processes, and many of these costs qualify for the DGTC. Console compliance testing costs, necessary for publishing on PlayStation, Xbox, or Nintendo platforms, are qualifying expenditure.

PEGI ratings processing and legal content reviews also qualify as part of the production process. These costs are often overlooked but can represent significant expenditure, particularly for games targeting multiple platforms or regions.

Costs That Don't Qualify – Watch Out!

While the DGTC covers a broad range of development expenditure, certain costs are specifically excluded. Understanding these exclusions is crucial for accurate claim preparation.

General administration or HR costs not directly tied to development are excluded. You must apportion your costs to remove any staff time not spent on development; the same goes for any other cost items which don’t wholly contribute to the development of the game.

The legislation also excludes expenditure incurred on designing the initial concept for the digital game. You need to work out when your development begins (when the project was green-lit) and exclude any costs (or portions of costs) which relate to the initial concept.

Marketing and distribution costs don't qualify, as they occur after the game's completion. Similarly, live operations, post-release updates, debugging or maintaining a completed digital game fall outside the scheme's scope. The key is knowing when your development ends; this is when the game becomes available to the public or is delivered to the commissioning party.

How to Track and Categorise These Costs

Proper cost segregation in your bookkeeping is essential for maximising your DGTC claim. Implementing cost codes or tagging systems in your accounting software helps identify and categorise qualifying expenditure from the outset.

Detailed documentation is crucial for substantiating your claim. Maintain comprehensive records, including invoices, contracts, timesheets, and project documentation that clearly link expenses to your game's development. This documentation not only supports your claim but also streamlines the claim preparation process.

Pro Tip: Work With a Specialist Tax Consultant

A tax consultant with experience in the Digital Games Tax Credit can identify costs that studios often miss and ensure your claim captures every eligible euro. Their production-focused financial review can reveal qualifying expenditure you might not have considered.

The benefits of professional guidance extend beyond just identifying costs. A specialist can help structure your development processes to maximise DGTC benefits, ensure compliance with the legislation's requirements, and provide ongoing support throughout the claim process.

Ready to make your DGTC claim? The Digital Games Tax Credit offers substantial benefits for Irish game developers, but only if you capture the full scope of your eligible costs.

Whether you're preparing your first DGTC claim or looking to enhance future applications, we're here to help. Get in touch for a comprehensive review of your development costs and discover how much additional tax credit you could be claiming.