Research and development


What to watch out for when combining public support (subsidies or investment incentives) and R&D tax-deductible items?

Experience shows that a large number of companies only use one form of public support, whether these are subsidies or investment incentives, or an R&D tax-deductible item. In fact, these companies are often entitled to using several forms of support at the same time, combining them in an efficient manner and thus maximizing the benefits. Combining various forms of support, however, involves certain rules that need to be observed. 

23. 6. 2021

Mandatory information in project documentation for deduction of research and development: extreme formalism or legitimate expectations?

Requirements for the content of the document entitled “Research and Development Project” (currently “Project Documentation”) became a subject matter of numerous disputes between taxpayers and the tax administrator. The Supreme Administrative Court repeatedly confirmed that only the Research and Development Projects containing all exhaustively listed requirements give rise to the entitlement to use the deduction of research and development. The amendment to the Income Taxes Act has changed the concept of using the deduction since 1 April 2019 in order to remove the then perceived shortcomings in the law and make the deduction simpler, more attractive and more available to a greater number of taxpayers. The government even stated that the deduction of research and development would be the most significantly subsidised form of public financing for corporate investments. 

30. 3. 2021

Wage compensation as deductible (non-deductible) expenses in the research and development tax relief

For five years, the expert public has been waiting for the decision of the Supreme Administrative Court in the matter of deductibility/non-deductibility of the wage compensation in the form of a holiday as part of the research and development (“R&D”) tax relief item. Tax advisors were convinced that the recognition of this expense is fully legitimate; however, the state administration firmly rejected it. At the turn of 2019 and 2020, two rulings of the Supreme Administrative Court (“SAC”) confirmed that the recognition of this expense was fully justified. At the end of last year, the General Financial Directorate sent a methodical instruction to individual tax authorities to determine the wage compensation amounts. What does this document mean in practice and what should the taxpayers pay attention to? 

16. 2. 2021

Custom development and its utilisation as part of a tax-deductible item for research and development

In August 2020, the much-expected Instruction No. MF-17 was issued in the Financial Bulletin, reacting to the amendment to the Income Taxes Act in relation to the tax-deductible item for research and development and commenting on, inter alia, the much-debated issue of custom development. Apart from that, the Financial, Tax and Accounting Bulletin featured an article by a General Financial Directorate representative that focused on the same issue as well. How is custom development treated in practice? 

16. 2. 2021

Calculated Expenses Cannot Be Used in the Calculation of Deductions on Research and Development

The regional court in Hradec Králové reviewed the legitimacy of calculating the amount of deductions for research and development (“R&D”) by means of ‘calculated expenses’. The court ruled that the Income Taxes Act requires the use of expenses actually incurred and for the purpose of calculating R&D deductions it does not allow valuing internal R&D project costs on the basis of production calculation, which is common for valuating internally produced inventory. 

12. 3. 2020

Regulation of Research and Development Tax Deductions: Victory of Substance over Form

The outcome of development projects is always uncertain. Therefore, it is important to provide various forms of aid for businesses to embark on these uncertain projects. From the tax perspective, this primarily includes the possibility of treating research and development costs as a tax-deductible item. However, in respect of this form of aid, some businesses have so far objected that the regulation itself is uncertain. All this has changed with the amended Income Taxes Act that significantly revises the manner of regulating deductions for promoting research and development. 

24. 5. 2019