Beyond Cost 2024

The Knowledge Development Box (KDB) is a tax incentive policy tool aimed at reducing the corporate tax rate to attract multinational corporations to IrelandPUBLIC SECTOR INTERVENTION 6 Knowledge Development Box, IrelandPUBLIC-PRIVATE PARTNERSHIP 5 Tax incentives for automotive manufacturing, Audi and Mexico A range of tax incentives and a streamlined regulatory framework has prompted car manufacturer Audi to establish and expand its production capacity in Mexico. The Mexican government provided tax incentives and streamlined regulatory processes to encourage German carmaker Audi to establish a manufacturing plant in San José Chiapa. The plant went into operation in 2016 and produced 175,626 vehicles last year. With over 5,300 employees, the manufacturing facility has been a major generator of local jobs and has contributed to the growth of Mexico’s automotive industry. Several premium and sports models are produced at the plant. In June 2024, Audi announced plans to invest an additional €1 billion in its San José Chiapa facility to begin production of electric vehicles, including the newer Q8 E-tron. The decision is likely to create over 500 new jobs at the plant, which is located next to its just-in-sequence supplier network. The facility is said to be a prime example of an Audi Smart Factory model, having been entirely planned and designed for computer-simulated operations. Source: Audi. (n.d.). Audi in Mexico; Automotive Logistics. (2016). Smooth logistics underpins assembly at Audi’s Mexican plant. Impact Financial Regulatory Operational Strategic The rate of reduction has generated substantial tax savings and boosted after-tax profits for firms across several industries, particularly those in innovative fields that carry out extensive R&D.The government’s introduction of a reduced 10% corporation tax rate on profits from intellectual property assets contrasts with the standard 12.5% corporate rate, incentivizing companies to carry out R&D activities in Ireland.Companies must devote an increased amount of resources to comply with the tax incentive, such as tracking and documenting R&D activities, qualifying assets and tracking income. New systems and process may be required to monitor R&D activity and accurately track expenditure and income streams.Companies are encouraged to take a long-term perspective on R&D investment and commercialize new innovations in Ireland before scaling to other regions. The policy also aligns with Ireland’s aim of becoming a more advanced knowledge-based economy. Source: Deloitte. (n.d.). Knowledge Development Box (KDB); KPMG. (n.d.). Knowledge Development Box. Beyond Cost: Country Readiness for the Future of Manufacturing and Supply Chains 19