The devil is in the detail of the new digital gaming tax credit, writes KPMG partner Damien Flanagan (pictured)

Following exponential growth within the gaming sector over the past 10 years, the minister provided details of Ireland’s first Digital Gaming Tax Credit (“DGTC”) which was previously referred to by the minister in his Budget 2021 speech last year.

In order to support employment growth in the Digital Gaming sector in Ireland, a refundable DGTC of 32% will be available to companies for expenditure incurred on the design, production and testing of a game. A limit of €25m of eligible expenditure per project will apply, along with a minimum €100k of eligible expenditure being required to make a claim.

European State aid approval is required and therefore the relief will be subject to a commencement order.

While the full details of the new DGTC will be published shortly as part of Finance Bill, the initial details announced by the minister are welcomed. The rate of 32% is in line with the rate which applies for Film Relief and is also broadly in line (and in some cases exceeds) the rates for similar gaming tax credits in other jurisdictions throughout the world, such as France, Germany, UK and Ontario (Canada).

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The minister described ‘eligible expenditure’ as being expenditure incurred on the design, production and testing of a game. With approximately 2,000 people working in the game development sector in Ireland, we would expect that presently companies are required to outsource aspects of game development and we await further detail on how such outsourced expenditure will be treated.

A claim for the DGTC can only be made in respect of a digital game which has been issued with a cultural certificate from the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media.

This is aligned with other jurisdictions which require Digital Gaming projects to pass a “cultural test” to establish whether the game developed is “culturally significant” based on certain criteria. Such a test can assist in the credit being approved by the European Commission.

From our review of similar DGTC schemes in other jurisdictions, what became apparent is that the incentives are usually linked to ‘the game’, which can see companies who develop supporting infrastructure and systems (which are critical to the game) not being eligible.

For example, a company developing a communication platform which is used as part of a video game, may not be eligible to claim the DGTC as the communication platform may be not be considered as being related to the design, production or testing of the game itself.

We await the full details.