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Global investment and innovation incentives updates: April 2019

Global developments benefiting business

This monthly publication provides a summary and updates on the latest global developments in research and development (R&D) credits, grants, and other incentive arrangements. More than 50 countries offer specific incentives and this newsletter focuses on identifying and outlining what could be the right incentives for your organization.

Australia

Future of R&D Incentive Regime

Australia's pre-election Federal Budget announced on 2 April 2019, did not contain any measures on proposed changes to the R&D tax incentive regime, which has been in limbo since the review process commenced in 2016.

The forward estimates suggest that a re-elected Coalition government would continue to pursue the R&D amendments, albeit in a revised format that would satisfy the recent Senate recommendations. However, Labor is expected to form the next government in May, with campaign materials and public comments reflecting a commitment to largely preserving the R&D tax incentive, subject to the ongoing affordability of the regime.

Labor also has publicly committed to establishing an inquiry into strengthening research capabilities across the government and would target an increase in Australia’s R&D spend from 1.8 percent to 3 percent of GDP to restore the country’s international competitiveness. It also intends to develop a charter with the Australian science and research community to establish reciprocal roles, responsibilities, and expectations of government and researchers.

Should Labor prevail in the May election, a reinvigorated consultation process is likely to commence after the mini-budget, which is expected to be announced before September. Until then, the future of the R&D regime is uncertain. Scheme budget

Scheme budget TBD
Type of incentive R&D tax incentive
Deadline n/a

Contact your Australia representative

Roisin Arkwright, 
principal
+61 2 9322 7412

Czech Republic

Applications for Employee Corporate Education II Program

The Ministry of Labor and Social Affairs has announced Call No. 97 for “Employee Corporate Education.” Applicants for this call include employers, and supported activities include employee professional education in areas such as general IT, soft and management skills, language education, etc. A cash grant will be available for payroll costs of employees participating in training, payroll costs of in-house lecturers, and educational activities in the form of outsourced courses. The amount of eligible costs per project ranges from CZK 0.5 million and CZK 10 million. The level of support per project is 85 percent of eligible costs in respect of utilization in the “de minimize regime” and 50 percent to 70 percent for utilization of the “block exemption regime” (regimes that relate to the granting of state aid under EU rules) depending on the size of the business.

Scheme budget CZK 1.7 billion
Type of incentive Cash grant
Deadline 15 May 2019

National Call under LIFE Program

The Ministry of the Environment has announced a national call under the LIFE program for grant applications in two sub-programmes: “The Environment” and “Climate.” Applications may be submitted by public institutions and corporate entities, but the projects must be implemented in the Czech Republic (as well as in the capital, Prague).

The objectives of the call under the Environment sub-program include environmental protection, efficient use of resources, and environmental administration and information. The Climate sub-program relates to areas such as combating and mitigating climate change, adjusting to climate change, and climate administration and information.

The maximum level of support for co-funding one project under the national call is 20 percent of total eligible costs, up to CZK 10 million (net of VAT). The total level of support as part of the funding from EU sources is 55 percent to 75 percent of eligible costs.

Type of incentive Cash grant Cash grant
Deadline 30 April 2019 14 March 2019–first voluntary round

24 June 2019–second mandatory round

Contact your Czech Republic representative

Luděk Hanáček,
partner
+420 606 654 304

Germany

Energy Efficiency and Process from Renewable Energy in Industry

The federal government aims to reduce primary energy consumption in Germany by 50 percent by 2050 as compared to 2008. The Federal Ministry of Economic Affairs has released a “contest module,” following four modules of the funding scheme, “Energy efficiency and process heat from renewable energies.” Grants are provided for investment in the energetic optimization of industrial and commercial plants and processes that contribute to higher energy efficiency or reduced fossil energy consumption in companies. Selection criteria for this contest are CO2 savings per year achieved per funding Euro (funding efficiency). Projects that result in the highest reduction in CO2 emissions will be given priority in terms of funding.

Eligible participants Private and public companies and freelance professionals, regardless of size or type of business activities, but the business premises must be in Germany
Scheme budget Funding for additional investment up to 50 percent of eligible costs. Grants are limited to EUR 5 million
Type of incentive Non-refundable cash grant
Deadline Applications may be submitted before 30 June 2019, although the Program Management Agency reserves the right to close the call once the sum of applications exceeds the available budget (EUR 7 million) by 50 percent.

Contact your Germany representative

Isabel Antholz,
service line leader
+49(0) 40 32080 4910

Malaysia

MSC Malaysia Status Tax Incentive Update

The Malaysia Digital Economy Corporation (MDEC) recently released an announcement to provide an update on the MSC Malaysia Status tax incentive. The key updates on the incentive are as follows:

  • Moving forward, the tax exemption will be granted for income derived from services activities (Services Incentive) and/or intellectual property (IP Incentive).
  • The policy for the IP Incentive is still under review by the government; the MDEC will be releasing further information in due course.
  • The Services Incentive has been approved by the government and will be regulated under the new Income Tax (Exemption) (No. 10) Order 2018 that was gazetted on 31 December 2018.
  • Applications for the Services Incentive can be made as from 2 April 2019.
  • New application guidelines have been issued to provide basic details on the eligibility criteria, qualifying promoted activities and application process. The application form can be downloaded from the MDEC website.

Contact your Malaysia representative

Tham Lih Juin,
executive director, Tax
+60 3 7610 8875

New Zealand

R&D tax credit

The Taxation (Research and Development Tax Credits) Bill has been considered by the Finance and Expenditure Committee, improvements have been made, and the bill is likely to be enacted by mid-May 2019.

The focus of the incentive is primarily on R&D conducted in New Zealand, although some supporting activities can be undertaken outside the country.

The regime defines the types of activities that would qualify for the incentive, as well as qualifying expenditure. Eligible costs include employee costs, depreciation of assets used in R&D and the cost of goods and services used as part of the R&D.

Specific rules would apply to internal software development, up to an expenditure cap of NZD 25 million.

For more details, see the article on tax@hand.

Scheme budget Minimum spend required is NZD 50,000 (equivalent of NZD 7,500 credit); the maximum claim is NZD 120 million of expenditure (the equivalent of NZD 18 million credit), with a possible increase upon application
Type of incentive 15 percent non-refundable tax credit generally for year 1 (more policy work is being undertaken that will allow more businesses in a tax loss position to obtain a refundable tax credit from year 2 of the regime)
Deadline Applies as from 2019/20 income year (i.e. R&D expenditure as from 1 April 2019, for many New Zealand-based taxpayers or as early as October 2018 for early balance date taxpayers)

Contact your New Zealand representative

Robyn Walker, 
national technical director, Tax
+64 4 470 3615

Portugal

Incentives for the qualification of small and medium-sized enterprises (SMEs)

A cash grant is available to SMEs undertaking qualified projects to promote their competitiveness and responsiveness in the global market and strengthen their organizational and management capacities. Top priorities are an investment in the development of strategic and management capacities systems, such as management systems for the reconciliation of professional, personal and family life, modern networks for the distribution, and the placement of goods and services and the use of ICT.

Scheme budget EUR 21.5 million
Type of incentive Non-repayable cash grant up to 45 percent of eligible costs, with the exception of projects in the Lisbon region, where the maximum is 40 percent
Deadline 31 May 2019


Incentives for Technology R&D (Collaborative projects—International Partnerships)

Cash grants are available for support projects led by national enterprises in cooperation with national academic institutions involving the participation of at least one principal investigator of the Massachusetts Institute of Technology (MIT), Carnegie Mellon University (CMU), or the University of Texas at Austin (UTA) in one or more of the technological areas identified in the MIT-Portugal, UTA-Portugal, and CMU-Portugal Programs.

Scheme budget EUR 22.8 million
Type of incentive Universities and research centers—Non-repayable cash grant of 75 percent of eligible costs, with the exception of investments in the Lisbon region, where the maximum is 40 percent

Enterprises—Non-repayable cash grant for projects up to EUR 1 million, with the exception of investments in the Lisbon region, where the maximum is 50 percent, and the Algarve region, where the maximum is 62 percent
Deadline 31 May 2019

Contact your Portugal representative

Sérgio Paulo Oliveira, 
partner
+3512 1042 7527

Thailand

Investment Promotion for Rail System

The Board of Investment (BOI) grants investment incentives for the manufacture and/or repair of trains, and parts or equipment for the rail system, including passenger cars, and special measures to promote investment in the rail system and related industries. The incentives take the form of corporate income tax exemptions.

Scheme budget Minimum investment capital of THB 1 million (excluding the cost of land and working capital)
Type of incentive Corporate income tax exemption for eight or five years, depending on the type of activity (no capped amount)

If the investment is in a designated province, an additional 50 percent corporate income tax exemption will be granted for five or three years from the date the full exemption expires
Deadline Applications must be submitted to the BOI by 30 December 2021, and projects must be ready to commence full operation within three years from the date the investment is approved

Contact your Thailand representative

Anthony Visate Loh,
country partner, Tax and Legal
+66 (0) 2034 0112

Poljun Divari,
legal director
+66 (0) 2034 0000
Ext. 11231

For more information

For more information on any of the programs listed above, please contact the in-country representative or your usual contact.

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Global investment and innovation incentives updates: Global developments affecting research and development

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