What Is the Digital Games Tax Credit?

The Digital Games Tax Credit in Ireland is a game-changing (pun intended) initiative introduced by the Irish government to boost its gaming industry. Essentially, it's a form of financial support that offers eligible companies up to 32% relief on qualifying expenditure related to the development of digital games.

Whether you're an indie developer or a major studio, this incentive could dramatically change your bottom line, especially in a high-cost sector like gaming.

Introduction of the Digital Games Tax Credit

Globally, video games are expected to surpass $200 billion in revenue by 2025, and Ireland is staking its claim in that massive pie. Home to a young, tech-savvy population and a strong digital infrastructure, the country is an ideal location for game development studios to flourish.

Big names like EA and Blizzard already operate here, and indigenous studios are sprouting with increasing frequency. The Irish government recognises this momentum and understands that to compete globally, tax incentives are necessary to draw investments, both domestic and international.

The Digital Games Tax Credit was introduced under Ireland’s Finance Act 2022 and became active in January 2023. The credit was the result of extensive consultation between policymakers, industry stakeholders, and economic advisors.

Several arms of the Irish government are involved in administering this tax credit. The primary bodies include:

• Revenue Commissioners: Handle the tax credit application, processing, and financial claims.
• Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media: Responsible for certifying whether a game qualifies as culturally relevant or significant.

While not directly involved in the credit, Enterprise Ireland supports startups and may collaborate for broader growth strategies.

Eligibility Criteria for Companies

Not every game developer can cash in on this incentive—there are specific criteria companies must meet:

1. Irish Residency: The company must be based in Ireland or, if based in an EEA country, have operations in Ireland.
2. Eligible Company: The company must carry on a trade of developing video games and be tax compliant and not “undertaking a difficulty” (i.e., must be a going concern).
3. Qualifying Digital Game Development Activities: The game must be a digital game and not produced for gambling, advertising or promotional purposes (nor have any extremist, hateful or obscene content).
4. Cultural Certification: Projects must undergo a cultural test and be certified as “qualifying digital games” by the Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media.
5. Minimum Spend: A minimum spend of €100,000 on qualifying expenditure is required, ensuring only serious development projects are considered.
6. Commercial Intent: The game must be intended for commercial release—not academic or hobbyist projects.

This ensures the credit is directed toward genuine commercial developers who will contribute economically and culturally to Ireland.

Types of Costs Covered

The tax credit covers a wide range of costs, which is a huge relief to developers who often juggle multiple budget categories. Covered costs include:

• Employee salaries related to game development
• Freelancers and contractors (not exceeding €2m)
• Capital costs of assets for development
• Rental or leasing costs for development
• Consumable items, software, intellectual property and copyrights

This comprehensive coverage makes the credit immensely attractive, particularly for small-to-mid-sized developers who often struggle to fund all aspects of a game’s lifecycle.

Tax Relief Percentage and Cap

The tax credit provides a 32% refundable tax credit on qualifying expenditures, up to a cap of €25 million per project. That’s a generous sum, especially when compared to other European countries. If a company spends €5 million on a qualifying game, they could get up to €1.6 million back through this scheme.

That refund can either reduce your company’s tax bill or, in some cases, be received as a cash payment if your relief is greater than your Corporation Tax bill—making it ideal for early-stage companies with high R&D spend but low revenue.

Step-by-Step Application Procedure

Applying for the Digital Games Tax Credit is a structured process but one that demands attention to detail. Here's a simplified step-by-step guide:

1. Initial Planning: Confirm your eligibility and budget to meet the minimum qualifying expenditure.
2. Cultural Certification: Apply to the Department of Culture for a cultural certificate (either final or interim).
3. Compile Documentation: Gather financial data, development timelines, contracts, and staffing plans.
4. Submit Tax Credit Claim: Apply via the Revenue Commissioner’s portal using the correct forms and supporting documents.
5. Await Approval and Payout: Once approved, the credit is applied to your tax liability or refunded as a cash payment.

You can claim for all your costs in one go with a final certificate, even if your development covers more than one accounting period.

Pro tip: if your project is ongoing for multiple years, you can apply in tranches with an interim certificate to unlock funds faster without waiting for project completion.

Each of these steps requires time, effort, and often the help of a tax advisor or accountant. We recommend you get a jump on your claim as soon as possible to avoid missing any deadlines or submitting an incomplete claim.

Required Documentation

When it comes to applying for the Digital Games Tax Credit in Ireland, documentation is king. Revenue is meticulous, and rightfully so—you're potentially claiming millions in tax relief.

To ensure a smooth process, you’ll need to compile a thorough package of documents that prove your qualifying expenditure. This is not required for your actual submission, but could be requested by Revenue at any point. The Cultural Test does require some documentation to be submitted when applying.

Here's what typically needs to be included:

• Game Overview: A description of the proposed game with an outline of the how the game develops is required for the Cultural Test.
• Financial Statements: Itemized breakdowns of all qualifying expenditures, including invoices, receipts, and payroll summaries.
• Employment Records: Proof of staff involvement in the game development, including contracts, roles, and time logs.
• Cultural Test Application: A completed and submitted cultural test form with answers that demonstrate the game's cultural, artistic, or educational value.
• Tax and Legal Records: Company registration documents, tax compliance certificates, and previous financial statements if applicable.

It’s advisable to digitally organise and timestamp all these documents, as the Revenue may request further clarifications.

Engaging a financial advisor or tax consultant who specialises in creative sector incentives can significantly streamline the process and reduce the risk of rejection.

Deadlines and Approval Process

The deadline for making your claim depends on the type of certificate you’ve received from the Department of Culture:

• Interim Certificate: The deadline is 12 months from the end of the accounting period in which the expenditure occurs (so long as the certificate has not expired).
• Final Certificate: The deadline is 12 months from the end of the accounting period in which the last expenditure for the game occurs.

While the tax credit is incredibly valuable, it’s not instant. Understanding the expected timelines and the steps involved in approval is crucial for project planning and cash flow management.

The Cultural Test application is often the longest part. Depending on backlog and complexity, it can take weeks to get a decision from the Department of Culture. Once the cultural certificate is granted, the application to Revenue can begin.

After approval, the credit will be applied to your tax liability. If you’re not yet profitable, the refund is typically issued within 6 to 8 weeks from claim approval.

Questions? Get in touch!

Claiming the Digital Games Tax Credit is a complex process, riddled with caveats and complications. We’ve been making tax credit claims in the creative sector for over a decade, so we’ve gotten to know how to maximise claims without compromising their robustness.

If you want to discuss your options, or confirm your eligibility, get in touch with Myriad’s expert team.