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  • Service: Tax
  • Type: Regulatory update
  • Date: 10/8/2013

Ireland 

Taxes and Incentintives
Ireland Taxes and incentives for renewable energy KPMG Global Energy & Natural Resources.

Support schemes

Investments and other subsidies


Corporate tax relief


Irish tax law provides tax relief for corporate equity investments in certain renewable energy projects. Commonly known as Section 486B relief, the law allows a deduction from a company’s profits for its direct investment in new ordinary shares in a qualifying renewable energy project. There are a number of conditions that must be satisfied for the investment to qualify for the relief, and the relief is capped at certain levels. Examples of renewable energy projects that would qualify for the relief include those in the solar, wind, hydro and biomass categories.


EII scheme


In 2011, the Irish government introduced the Employment and Incentive Investment (EII) scheme, designed to promote the creation of jobs and encouraging R&D activities. The EII scheme provides tax relief for eligible individuals who investment in certain qualifying small and medium sized trading companies. The relief takes the form of a deduction from an individual’s taxable income in the year of investment (subject to certain restrictions), taken after a three-year investment term has passed (subject to certain conditions being met). A number of conditions must be satisfied for an investment to qualify under the scheme. However, the legislation includes some helpful provisions designed to ensure that renewable energy projects meet the qualifying criteria.


R&D tax credit


A company can claim an additional tax credit of 25 percent on incremental qualifying expenditure incurred on R&D activities. Qualifying expenditure includes expenses such as salaries, overhead, materials consumed, etc. A tax deduction is also available against the company’s profits at 12.5 percent. This can result in a 37.5 percent net subsidy for a trading entity (12.5 percent corporation tax deduction and a 25 percent R&D tax credit). The tax credit can be used to shelter a group’s corporation tax liability or carried forward indefinitely to reduce a company’s future tax liability. Where there is limited or no current or preceding corporation tax liabilities, a company may claim to have any remaining credit offset against current year payroll taxes.


Accelerated capital allowances


Companies are entitled to claim accelerated capital allowances (tax depreciation) of 100 percent for capital expenditures incurred on the purchase of certain energy-efficient equipment or vehicles.

Operating subsidies

Quota obligation


Under an EU Directive, the Irish government has an obligation to ensure that, by 2020, 16 percent of all energy consumed in Ireland across the electricity, heat and transport sectors is from renewable sources. The Irish government has planned that the 16 percent overall target will be achieved by 40 percent of electricity consumed being from renewable sources, 12 percent of consumption in the heat sector being from renewable sources, and 10 percent of consumption in the transport sector being from renewable sources.


Feed-in Tariff


Ireland currently has two Renewable Energy Feed in Tariff (REFIT) schemes open for applications. The REFIT 2 scheme applies to onshore wind, small hydro and landfill gas. The REFIT 3 scheme applies to biomass technologies. The schemes operate by guaranteeing a minimum floor price for supplies of energy generated from renewable sources. The 2013 reference prices for the REFIT 2 and REFIT 3 schemes are as follows:


The energy supplier is also entitled to a balancing payment for every kWh purchased from the generator. The balancing payment under REFIT 2 and REFIT 3 is fixed at EUR9.90/MWh. The full EUR9.90/MWh is payable to the supplier where the market payment is equal to or less than the reference price. If the market price exceeds the reference price but is less than the combination of the reference price plus balancing payment, the balancing payment shall be EUR9.90 less the amount by which the market payment exceeds the reference price. However, where the market payment is equal to or greater than the combination of the reference price plus balancing payment, no balancing payment is payable.


REFIT 2
Category Price
Onshore wind (above 5 MW) EUR69.235/MWh
Onshore wind (equal to or less than 5 MW) EUR71.664/MWh
Hydro (equal to or less than 5 MW) EUR87.455/MWh
Biomass Landfill Gas EUR85.026/MWh

REFIT 3
Category Price
AD CHP (units less than or equal to 500 kWe) ct15.7/kWh
AD CHP (units of greater than 500 kWe) ct13.6/kWh
AD (non CHP) (units less than or equal to 500 kWe) ct11.5/kWh
AD (non CHP) (units of greater than 500 kWe) ct10.4/kWh
Biomass CHP (units less than or equal to 1500 kWe) ct14.6/kWh
Biomass CHP (units of greater than 1500 kWe) ct12.5/kWh
Biomass combustion
(non-CHP)
ct9.9/kWh for using energy crops
ct8.9/kWh for all other biomass

Additional information

Ireland as a hub for green asset management


Global investment is booming in green and clean-tech industries that produce renewable energy, increase energy efficiency or provide sustainability solutions. Major investors include pension funds, life funds, large corporations and high net worth individuals. These investors are attracted to a variety of fund structures to diversify the risk between different green investments and different geographies.


With almost 25 years expertise and experience, Ireland has one of the most sophisticated investment management industries globally. This includes expertise in fund servicing, administration and asset management. Fund promoters are attracted to Ireland due to its open, transparent and well-regulated investment environment, its strong emphasis on investor protection, its efficient tax structure (with a 12.5 percent corporate tax rate) and its dynamic, innovative business culture.


In addition to Ireland’s credentials as a leading investment funds location, the case for Ireland as a global center for green asset management is even more compelling. For many years a large number of Irish companies have successfully developed renewable and sustainable projects and related technologies on a global scale. As a result, Ireland has been able to create an unparalleled talent pool with the requisite expertise to support green investments. The combination of these two factors sets Ireland apart.


A number of green investment funds have established operations in Ireland and all indications would suggest that the scale of this activity will increase considerably in the short to medium term. A public private partnership body known as the Green IFSC (GIFSC) has been established to promote Ireland as a center of excellence for green asset management.

 

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