The deduction value depends on the company size, expenditure type and whether the company has a formal status of R&D centre. Eligible expenditure includes:
- Salary payments and social security contributions
- Research equipment
- Obtaining Intellectual Property (IP) protection
- Scientific expertise, research and opinions
- Commodities and raw materials
- Amortisation of intangible and fixed assets (some exclusions apply)
To benefit from the tax relief, a company must record eligible expenditure incurred in relation to R&D work undertaken in a given year; however, relief is also permitted for qualifying projects in progress.
Depending on the category of eligible expenditure and the company size, tax relief may be granted up to 100% of the eligible costs (up to 150% for those companies with a status of R&D centre).
Moreover, employees engaged in R&D are entitled to preferential lump sum tax deductible costs amounting to 50% of their revenues which results in an increase of their net remuneration.
Companies having a status of R&D centre are entitled to specific grants. R&D tax relief may not include expenditure which was reimbursed to the company in any way.
As of 1 January 2019, the Innovation Box was introduced which reduces to 5% the tax rate applicable to specific income derived from IP rights. The rate relates to costs incurred on self-developed IP rights in respect of R&D activity and the costs of subcontracting R&D activity, provided the company conducts R&D activity related to development, creation or improvement of a given IP component.
For more information on R&D tax relief, the Innovation Box or to find out whether you may be eligible to claim, please contact us.