Research and Development Tax Incentives
Slovakia is often overlooked as a top R&D performer, but the government has been trying to strengthen the R&D sector though incentives such as tax credits, cash grants, and patent-related incentives. In recent years, the government has offered targeted stimuli to support R&D activities with the goal of promoting a knowledge-based economy.
As of January 1, 2015, Slovakia offers an R&D super deduction of 125-150%, as well as tax credits for companies located in under-developed areas and specified projects.
The super deduction allows for 125% of qualified expenses incurred from R&D activities to be deducted from the tax base. A company is eligible for an additional 25% deduction if the portion of the currently qualifying R&D expenses is greater than the prior year’s qualifying expenses. The super deduction can be carried forward for four years, but it cannot be used with any other type of incentive.
Slovakia offers a tax credit to those companies willing to relocate or expand to under-developed areas within Slovakia, known as the Tax Relief for Technological Centers. The credit ranges from 25% to 35% of qualified costs and is applied against a company’s annual income tax liability.
A tax credit is also offered to companies that engage in specific types of projects that utilise applied research, experimental development or feasibility studies. The credit rates are determined by the amount of operational expenses, IP protection, wages, company size, project type and other variables.
Slovakia also offers non-tax related R&D incentives in the form of cash grants, such as CAPEX and OPEX.
Description of Incentive
R&D purpose expenses can be deducted three times in the tax period in which they are incurred, on the arrangement that the R&D work performed is not out of scope of the typical business activities. Fixed assets depreciation expenses cannot be included in R&D expenses.
In order to substantiate their activities, companies that are applying for the tax relief of R&D must submit their claim with relevant R&D documentation. This documentation must include details of the project undertaken, substantiate conformity with certain tax requirements, and specify expenses incurred in the R&D activities.
If R&D activities are performed in a country within the European Economic Area, or in a country which has concluded a double taxation treaty with Lithuania, the R&D may be performed outside the country yet can still be claimed under the Lithuanian regime.
Swanson Reed offers the following services:
- Advice on tax preparation relevant to claiming the R&D tax credits incentive
- Preparation of documents relating to filing and substantiating a R&D taxation claim
- R&D tax advice and consultations
- R&D tax claim planning and preparation
For a full range of services in relation to the credit, please click here.