Czech R&D tax incentives
By Richard Jahoda, Grinex Czech Republic
The Czech Republic strives to attract high-tech businesses and to support research & development projects. It therefore offers two different types of tax incentive.
Corporate income tax relief
This could be granted for up to ten years as a part of an investment incentives package within the terms of the Investment Incentives Act. These are the qualification criteria: The minimum amount of investment in long-term tangible and intangible assets is CZK 10 million, of which at least CZK 5 million must be invested in new machinery, whereas at least half of the minimum investment amount must be financed with the investor’s own capital. At least 40 new jobs must be created.
Research & development cost allowance
Up to 100%/110% of the costs associated with research and development projects and incurred in a given tax year can be deducted from the tax base as a special tax allowance (this means that these costs are in fact deducted twice for tax purposes – once as a normal tax deductible cost and then as a special tax allowance). An extra 10% deduction is applicable for a year-to-year increment in eligible R&D costs. Compared to income tax relief there is no investment threshold for qualification. All income tax payers can use this allowance.
The non-utilised allowance (e.g., due to tax loss in current year) can be carried forward for three subsequent years. Both mentioned incentives are already effective and have already been granted in many cases. Taxpayers can apply to the local competent tax office for a binding ruling in respect of research and development costs, in the event that the taxpayer is unsure whether particular costs can be regarded as eligible for the allowance.
Richard Jahoda, Managing Partner
Grinex Czech Republic, Prague, Carlsbad, Budweis, Czech Republic
T: +420 222 516 889
Grinex Czech Republic was established in 2012 through a merger of three professional firms which had been active since the 1990s, with activities in tax consultancy, accounting, audit and business valuation. Grinex provides services to both domestic and international clients across all industries. Richard Jahoda is Managing Partner of Grinex Czech Republic. He is the Certified Tax Advisor and member of the Czech Chamber of Tax Advisors. He specialises in issues of international taxation, double taxation agreements and transfer pricing.
published: November 2014