In our January article entitled Are better days ahead for the R&D tax deduction checks? we summarised the impact of the amendment to the Income Taxes Act on the introduction of the possibility of proving compliance with the content requirements of project documentation using other means of proof. The amendment is intended to increase legal certainty and clarify doubts in tax audits, thereby encouraging eligible taxpayers to use the R&D deduction.

Currently, the Financial Administration of the Czech Republic and the Office of the Minister of Science, Research and Innovation informed about the outcome of the working group meeting, which is the launch of a pilot project in the area of assessment of research and development activities. The assessment should be carried out by experts in the relevant field through a technical card – a questionnaire that will help assess internationally valid criteria for R&D activities and distinguish them from other related activities. The technical card should include a notice of intent to deduct, a technical description of the activity, a description of the objectives stated in the project documentation, the stages of project implementation and an assessment of the results.

An independent expert assessment based on technical information completed by the taxpayer should give the taxpayer confidence that the project will meet the substantive criteria for the deduction. For the purposes of the pilot testing, the Financial Administration of the Czech Republic has identified a number of ongoing tax proceedings for which it could use an independent expert assessment with the consent of the taxpayer. If the taxpayer decides to use this option, the Tax Administrator will ask the Technology Agency of the Czech Republic (TA CR) to find an expert who will prepare an assessment report containing an assessment of the activity’s substantive nature based on the information provided by the taxpayer. This report can be used as evidence in the tax proceedings.

The above summary is based on currently available information, as neither the questionnaire nor the protocol have been published yet. At the same time, it is not clear whether, and to what extent the assessment will be binding for both taxpayers and the Financial Administration of the Czech Republic. Furthermore, the question remains how much the assessment will cost and who will pay for it. Since this is a completely unique institution, which we have not been used to in taxation so far, it is impossible to say for the time being what it will bring to taxpayers in practice. We will keep you informed as soon as further details become available.