The basic condition for claiming expenses in the implementation of research and development projects within the deductible item in the tax return is the correct and timely submission of the “Notification of intention to claim a deduction to support research & development”, i.e. the so-called notice to the relevant tax authority.
This obligation has been in force since 1 April 2019 and covers the first legal step of the taxpayer towards the tax administrator in relation to the implementation of a specific project for which they intend to claim the deduction. In the case of notification of multiple projects, the taxpayer is obliged to send a notice for each project separately, being aware of the fact that one submission to the tax office may contain several separate notices.
The notice must be in compliance with the legal requirements in terms of content and method of submission to the tax authority. These include:
- Taxpayer identification data
- Name of the research and development project reflecting its general focus
By doing so, the taxpayer essentially opens up only the possibility to claim eligible expenses for a research and development project, which is their right, not an obligation.
Whether the taxpayer will ultimately claim the deductible item for a research and development project is subject to the fulfilment of other criteria, which include, in particular, the presence of a valuable element of novelty in the project and clarification of research or technical uncertainty in the project solution.
When to submit a notice?
As companies plan budgets, business activities, investments and personnel matters within the new fiscal year, they also plan research and development projects, including the capacity availability of individual employees of the R&D department. Development activities defined in this way are most often launched at the beginning of the new year. Since the planning is finalised with the approaching end of the year, it is necessary to keep in mind that in order to include and apply development projects in the deduction, it is necessary to send a notice to the tax authority in time. In the context of this article, timely submission means the deadline by the end of this year, i.e. by 31 December 2022. The advantage of such a submission is primarily the possibility of including the entire year in the cost items without the need for complicated filtering of the outputs of cost items from the date of sending the notice and eliminating unclaimable expenses/costs, which in many cases leads to a burden on employees of economic departments.
Taxpayers who implement R&D projects systematically but without a link to the start of the new (fiscal) year, i.e. mostly in the case of irregular (commissioned) research and development projects, submit the “Notification of intention to claim a deduction to support research & development” on an ongoing basis throughout the financial year. These companies are already obliged to separate expenses on R&D projects into non-claimable, i.e. expenses/costs incurred before the notice is sent, and claimable, i.e. expenses/costs of the project incurred after sending the notice to the tax authority, i.e. such expenses that can be included in the deduction for research and development projects.
We will be happy to help you
By claiming the R&D deduction in your tax return, you can reuse the saved funds in R&D projects to increase your competitiveness and gain a technical and technological lead. If you do not know what to do or do not have the capacity to solve everything in connection with the notice, do not hesitate to contact us. We will advise you on the title and content of the notice and its submission to the tax authority.