Czech Republic Corporate R&D Report
The most significant problem in the current system of the support for research and development consists in the tax uncertainty when assessing subsidies or tax deductions by taxation or other authorities. This is according to one third of responding companies that participated in the third survey conducted by Deloitte in cooperation with the Technology Agency of the Czech Republic (TA ČR) in the first half of 2015. Other problems most frequently included unclear implementation instructions for the conditions of eligibility of costs including the method of their calculation, which was the answer of 21% of respondents. As stated by 16% of respondents, a significant problem in general is the identification of activities that comply with the conditions of development for an application in subsidies or a tax deduction.
“As compared to 2014, the most frequent problem mentioned in the 2015 survey was the uncertainty in the assessment by taxation authorities, while in 2014, the most frequent problem were unclear implementation instructions. This was the answer of 36% of respondents in 2014. This change may be due to an increased number of financial inspections and legal disputes regarding these issues and their presentation in media. After numerous years, an interpretation practice begins to be created, as no specifying changes were made in the implementation documents” said Luděk Hanáček, partner in Deloitte’s Tax and Legal function, who is responsible for this area when commenting on the results of the 2015 survey. “With the start of a new programme period from 2014 to 2020, we can expect an increase in unclarities in implementation manuals for direct support, ie subsidies,” added Luděk Hanáček.
“All of the above factors refer to the necessity of changes or modification of the legislation or methodological guidance. In addition, there is a significant need to bring the interpretation practice of rules for the provision of subsidies into line with all bodies involved in the process of provision and inspection of such subsidies,” said Rut Bízková, Chairwoman of TA ČR. “To reduce the tax uncertainty in the application of tax deductions, a detailed interpretation to the assessment of the eligibility of the activities for the use of a tax deduction and introduction of mechanisms for an assessment and control increasing the assurance of taxpayers on the correct use of this indirect support would be beneficial,” she added.
A total of 60% of companies answered a question relating to the attitude of companies to the use of subsidies by stating that they have a good knowledge of and use them. When mapping the attitude to the use of the R&D tax deduction, 29% of responding companies stated that they know of the tax deduction, but they are not sure about the position of taxation authorities when assessing the applied costs; for this reason, they treat the use of this tax deduction as risky in terms of tax certainty.
The entire study entitled Tax and grant support for research and development activities can be downloaded at: www.deloitte.com/cz/vyzkum-vyvoj.