Knowledge Development Box \u00b7 2026
Knowledge Development Box (KDB) Ireland 2026: 6.25% CT on IP Income
The Knowledge Development Box (KDB) allows companies to pay a reduced corporation tax rate of 6.25%on profits from qualifying intellectual property, compared to the standard 12.5%. Qualifying assets include patents, copyrighted software, and plant breeders' rights developed through R&D in Ireland. Use our Contractor Tax Calculator to model your tax position.
What Is the KDB?
The Knowledge Development Box was introduced in Finance Act 2015 and took effect from 2016. It implements the OECD's Modified Nexus Approachfor IP regimes, ensuring that the tax benefit is linked to the R&D activity actually performed by the company in Ireland. The regime is fully OECD-compliant and has been reviewed under Action 5 (Base Erosion and Profit Shifting — BEPS).
6.25%
KDB Rate
Reduced CT rate on qualifying IP income
50%
Saving vs Standard
Half the 12.5% standard CT rate
Open
Election Per Asset
Choose which qualifying assets to apply it to
Qualifying Assets
Not all IP qualifies. The asset must be legally protected and developed through qualifying R&D in Ireland.
| Asset Type | Qualifies? | Notes |
|---|---|---|
| Granted patents | Yes | Irish or European Patent Office grants |
| Copyrighted software | Yes | Developed through qualifying R&D in Ireland |
| Plant breeders' rights | Yes | Protected under Irish or EU law |
| Design rights | Limited | Only if they have patent-equivalent protection |
| Trademarks / brands | No | Marketing IP does not qualify |
| Trade secrets | No | No legal protection recognized |
The Nexus Fraction
The nexus fraction determines what proportion of the IP profit qualifies for the 6.25% rate. It is the qualifying R&D expenditureincurred by the company (plus outsourced R&D to unrelated parties) divided by the total R&D expenditure(including acquisition costs and outsourced R&D to related parties).
Nexus Fraction Formula
Qualifying Profit = IP Profit x (QE + UPE) / (QE + UPE + RPE + ACQ)
QE = Qualifying R&D expenditure incurred directly by the company
UPE = R&D outsourced to unrelated parties (capped at 30% of QE)
RPE = R&D outsourced to related parties
ACQ = Cost of acquiring the IP asset
Example: Nexus Fraction Calculation
| In-house R&D spend | €800,000 |
| Outsourced (unrelated) | €200,000 |
| Outsourced (related) | €50,000 |
| IP acquisition cost | €150,000 |
| Nexus fraction | 1,000,000/1,200,000 = 83.3% |
If IP profit is 1,000,000:
Qualifying profit: €833,000 at 6.25% = tax of €52,063
Non-qualifying profit: €167,000 at 12.5% = tax of €20,875
Total CT due: €72,938
vs €125,000 at standard 12.5%
Saving: €52,063
How to Claim the KDB
Identify qualifying assets
Review your IP portfolio and confirm which assets meet the legal protection and R&D development criteria.
Track R&D expenditure
Maintain detailed records of qualifying R&D expenditure by asset, split between in-house, outsourced (related/unrelated), and acquisition costs.
Calculate the nexus fraction
Apply the formula to determine what proportion of IP profit qualifies for the reduced rate. Keep all calculations and supporting documents.
Elect on CT return
Make the KDB election on your annual Corporation Tax return (Form CT1). The election is per asset and must be made on or before the return filing date.
KDB vs R&D Tax Credit
| Aspect | KDB (6.25% Rate) | R&D Tax Credit (25%) |
|---|---|---|
| What it rewards | Profitable IP from R&D | Expenditure on R&D activities |
| Benefit | Reduced CT rate on IP income | 25% credit on R&D spend |
| Timing | Ongoing while IP generates income | Year of expenditure (with carry-forward) |
| Can both be claimed? | Yes | Yes |
| Documentation | Nexus fraction, IP tracking | R&D technical reports, expenditure records |