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Global investment and innovation incentives updates: July 2020

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

Amendments to Australian R&D tax incentive proposed

Controversial proposed amendments to the Australian R&D tax incentive are currently before the Australian parliament. A Senate Committee report is expected in August, so that the measures can be debated before the delayed Federal Budget in October 2020.

A number of measures have been proposed since 2018 that would significantly reduce the net tax benefit of claiming the R&D tax incentive. At a quickly scheduled public hearing on 29 June 2020, that advisers were not invited to attend, a number of companies and industry bodies, as expected, expressed negative opinions on the proposed amendments.

Despite an expectation that the start date was likely to be delayed by a year to 1 July 2020, the Australian Taxation Office (ATO) made it clear at the public hearing that, if enacted, the amendments would still take effect as from 1 July 2019.

Tax shortfall interest and penalties would be remitted where returns for the 2020 financial year submitted on the basis of the current law need to be amended.

Eligible participants Companies undertaking eligible R&D activities
Scheme budget N/A
Type of incentive R&D credit, repayable and non-repayable
Amount of incentive N/A (amendments would reduce net tax benefit of scheme for all applicants)
Application deadline Linked to company tax return filing deadline
Funding agency ATO

Innovation & Science Australia
Sources https://www.taxathand.com/article/14882/Australia/2020/Risks-of-R-D-amendments-return-for-FY20

https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/TLABRDTI/Public_Hearings

 

Contact your Australian representative

Roisin Arkwright,
principal
+61 2 9322 7412

Belgium

European Commission approves Flemish aid for investments in COVID-19 related products

On 19 March 2020, the European Commission adopted a state aid temporary framework (subsequently amended on 3 April, 8 May, and 29 June 2020), relaxing the state aid rules in respect of measures implemented by member states to support the economy in the context of the COVID-19 outbreak. On 19 June 2020, the Commission approved under the framework a scheme for strategic transformation aid submitted by the Flemish government, to provide support to Flemish companies investing in the production of COVID-19 related products. Companies undertaking such activities as of 1 June 2020 are eligible for direct grant funding of up to 50 percent of the total project cost. Examples of eligible COVID-19 products are medicines (including vaccines), hospital or medical equipment (including respiratory equipment and protective clothing), and the raw materials required for their production.

Eligible participants Flemish companies investing in the production of COVID-19–related products
Scheme budget EUR 21 million (estimated)
Type of incentive Direct grant., non-repayable
Amount of incentive Maximum 50 percent of the total project cost, subject to a minimum investment threshold of EUR 250,000, EUR 500,000, and EUR 1.5 million for small, medium, and large enterprises, respectively
Application deadline 1 November 2020
Funding agency VLAIO (Flanders Innovation & Entrepreneurship)
Sources https://www.vlaio.be/nl/nieuws/uitbreiding-sts-steun-voor-covid-19-gerelateerde-investeringen

https://ec.europa.eu/competition/state_aid/cases1/202026/286482_2166324_27_2.pdf


Increased investment deduction for SMEs

Several new tax measures were approved by the Belgian government on 9 July 2020, intended to reduce the economic effect of COVID 19 on Belgian companies. The most important measure for companies investing in research and development is the increased investment deduction. Small and medium-sized enterprises (SMEs) may deduct 25 percent of the cost of investment in fixed assets between 12 March and 31 December 2020, from their taxable base. In addition, the period for which small enterprises may carry forward unused investment deduction for 2019 is extended from one to two years.

Eligible participants Belgian SMEs/small enterprises 
Scheme budget N/A
Type of incentive Reduction in taxable base
Amount of incentive 25 percent of cost of qualifying investment
Application deadline N/A
Funding agency Belgian government
Sources N/A

Contact your Belgian representative

Renaud Hendricé,
partner
+32 2 600 6721

Czech Republic

New call for proposals relating to grants for industrial research and experimental development

The Ministry of Industry and Trade will be announcing in September 2020 a new call for proposals relating to grants for projects aimed at implementing industrial research and experimental development activities leading to specific outputs in the form of, for example, prototypes, industrial or utility models, proven technologies, or software.

Eligible participants Domestic entities
Scheme budget CZK 2.5 billion (EUR 93.6 million)
Type of incentive Cash grant
Amount of incentive Up to 70 percent of eligible expenditure

Amount depends on project budget, type of activity, and entity size with amounts ranging from CZK 1 million (EUR 37,500) to CZK 80 million (EUR 3 million)
Application deadline 15 December 2020
Funding agency Ministry of Industry and Trade of the Czech Republic
Source https://www.agentura-api.org/en/


New call for proposals relating to grants for innovative products, technologies, or services

The Ministry of Industry and Trade will be announcing in September 2020 a new call for proposals relating to grants for producing or introducing to market new and innovative products, technologies, or services (including, for example, strengthening the technical or utility value of products, technologies, or services), and increasing efficiency in the production process or provision of services.

Eligible participants Domestic entities
Scheme budget CZK 2.5 billion (EUR 93.6 million)
Type of incentive Cash grant
Amount of incentive Up to 45 percent (small entity), up to 35 percent (medium entity), and up to 25 percent (large entity) of eligible expenditure

Amount depends on project budget, type of activity, and entity size with amounts ranging from CZK 1 million (EUR 37,500) to CZK 75 million (EUR 2.8 million)
Application deadline 29 January 2021
Funding agency Ministry of Industry and Trade of the Czech Republic
Source https://www.agentura-api.org/en/en/

 
New call for proposals relating to grants for building research and development centers

The Ministry of Industry and Trade will be announcing in August 2020 a new call for proposals relating to grants for projects aimed at building or expanding industrial research, development, and innovation centers. The grant is to be used for the purchase of land, buildings, machinery, or equipment used in the building or expansion of such centers.

Eligible participants Domestic entities
Scheme budget CZK 1 billion (EUR 37.5 million)
Type of incentive Cash grant
Amount of incentive Up to 50 percent of eligible expenditure

Amount depends on project budget, type of activity, and entity size with amounts ranging from CZK 2 million (EUR 75,000) to CZK 30 million (EUR 1.1 million)
Application deadline 23 November 2020
Funding agency Ministry of Industry and Trade of the Czech Republic
Source https://www.agentura-api.org/en/en/

Contact your Czech Republic representative

Luděk Hanáček,
partner
+420 606 65 4304

Antonín Weber,
director
+420 73 316 1519

Lucie Tížková,
Consultant
+420 73 184 7774

Europe

European Innovation Fund Call published

On 3 July 2020, the European Commission published the first call for proposals under the new Innovation Fund. With a 10-year budget likely amounting to EUR 10 billion, the Innovation Fund is the European Commission’s largest funding program aimed at reducing greenhouse gas (GHG) emissions.

The Innovation Fund is intended to support highly innovative technologies and substantial flagship projects contributing to the EU economy’s green recovery, by helping businesses invest in clean energy and industry to boost economic growth, create local jobs, and give a competitive advantage to industry in the European Union.

The Innovation Fund aims to finance a varied pipeline, achieving an optimal balance across a wide range of innovative technologies in all eligible sectors in the EU member states, Iceland, and Norway. At the same time, projects must be sufficiently mature in terms of planning, the business model, and the financial and legal structure.

Eligible participants In the first call, only projects with investment exceeding EUR 7.5 million are eligible for funding. Applications may be submitted by any type of legal entity from any jurisdiction, but the activities must be executed in EU member states
Scheme budget Available budget in the first call is EUR 1 billion for full projects, and EUR 8 million for project development assistance. Total anticipated budget is EUR 10 billion
Type of incentive Funding
Amount of incentive ● Up to 60 percent of the extra capital expenditure compared with the reference technology

● Additional operating expenses compared with reference technology and loss of profit will be funded for a maximum of 10 years

● Total funding may amount to more than EUR 300 million per project
Application deadline 29 October 2020
Funding agency European Commission
Sources https://ec.europa.eu/clima/policies/innovation-fund_en

 
European Green Deal call to be published in September 2020

As published in the Green Deal, fighting climate change and making Europe climate-neutral by 2050 is a main priority for the European Commission. The Commission is, therefore, supporting Green Deal-related research and innovation with a dedicated funding call. The European Green Deal call for funding proposals will be published in September 2020 and will have a submission deadline of January 2021. This leaves interested parties with ample time to build their project(s). Since the Green Deal will significantly affect many other EU funding instruments (for example, the already existing LIFE instrument and the new European Innovation Fund), companies should review their sustainability strategy to align with the Green Deal.

Eligible participants Legal entities from EU member states 
Scheme budget Approximately EUR 1 billion
Type of incentive Financial support 
Amount of incentive Funding percentages will follow Horizon 2020 rules. Funding amounts between EUR 10 million and EUR 20 million per project are expected
Application deadline January 2021
Funding agency European Commission
Sources https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en

Contact your European representative

Renaud Hendricé,
partner
+ 32 2 600 6721

Germany

Call for proposals to identify and mitigate the effects of digital disinformation campaigns published

The circulation of so-called “fake news” via the internet and other social media platforms weakens the fact-based coverage provided by reputable media sources, and makes it difficult for politicians, authorities, and the public to get a reliable picture.

A call for proposals published on 7 July 2020 aims to increase opportunities to research and develop methods and technologies that can be used to identify disinformation, potentially using methods of machine learning. Additionally, the funding scope includes the analysis of distribution channels of false information and the evaluation of the effectiveness of actual and proposed German and European legal regulations in the area of disinformation.

Eligible participants Interdisciplinary consortia consisting of commercial enterprises, universities, research institutes, and other associations established in Germany
Scheme budget N/A
Type of incentive Non-repayable cash grant
Amount of incentive ● Up to 50 percent of eligible costs for commercial enterprises

● Up to 100 percent of eligible costs for universities and research institutes

● Small and medium-sized enterprises (SMEs) qualify for an additional bonus
Application deadline 18 September 2020
Funding agency Federal Ministry for Research and Education (BMBF) 
Sources https://www.bmbf.de/foerderungen/bekanntmachung-3077.html


Call for proposals to generate synthetic data for artificial intelligence published

Current achievements in the fields of artificial intelligence (AI) and machine learning are based on the increased hardware performance for processing large data sets as well as on a constantly growing volume of data. Users often face the problems that databases are not large enough for the implementation of innovative AI services and products, that existing data does not meet the requirements, or that data-driven models cannot be tested sufficiently.

A call for proposals published on 3 July 2020 aims to improve existing methodologies and simulation models, or develop new methodologies to generate realistic data sets (synthetic data) for creation and validation of AI models. Funding will be provided for research or method development activities, tool development, and/or validation of existing instruments in the field of data synthesis, statistical methods, data classification, or anonymization of personalized data sets.

Eligible participants Interdisciplinary consortia consisting of commercial enterprises, universities, and research institutes established in Germany
Scheme budget N/A
Type of incentive Non-repayable cash grant
Amount of incentive ● Up to 35 percent of eligible costs for commercial enterprises

● SMEs qualify for an additional bonus

● Grant capped at EUR 1.5 million per consortium
Application deadline 15 September 2020
Funding agency BMBF
Sources https://www.bmbf.de/foerderungen/bekanntmachung-3068.html

Contact your German representative

Dr. Sebastian Lange,
service line leader
+49 151 182 93720

Lukas Lechner,
manager
+ 49 151 580 75882

Indonesia

Tax incentives to help reduce economic impact of COVID-19

In response to the COVID-19 pandemic, the following income tax incentives are granted for the period from 1 March to 30 September 2020:

  1. An additional income tax deduction for taxpayers that produce medical equipment and household health supplies used in the fight against COVID-19. The additional deduction is 30 percent of the qualifying cost or expense incurred
  2. A deduction for donations by taxpayers to certain donation collection organizers
  3. A zero percent final income tax rate on additional income received from the government by individuals who (i) provide services in the field of health care, including health care workers and health care support personnel, and (ii) are under assignment to provide health care services to deal with COVID-19 in health care facilities and health care institutions. The zero percent rate also applies to the additional income received from the government by their heirs
  4. A zero percent final income tax rate on income/fees received from the government from the rental of land, buildings, and/or other assets used in the fight against COVID-19
  5. A three percent reduction in the normal corporate income tax rate for public companies with at least 40 percent of their shares being traded on the Indonesian Stock Exchange and that fulfill certain other requirements
Eligible participants Indonesia corporations and/or individual taxpayers, depending on the incentive
Scheme budget The regulation does not specify a budget for the tax incentives
Type of incentive Corporate and/or employee income tax, depending on the incentive
Amount of incentive See details provided above. The incentives apply only with respect to relevant income or expense received or incurred from 1 March to 30 September 2020
Application deadline There is no application, however, specific reporting requirements apply for certain incentives. 
Funding agency Indonesian Tax Authority
Sources https://www.pajak.go.id/

Contact your Indonesian representative

Roy S. Tedja,
partner
+62 21 5081 8809

Isabella Saragih,
senior manager
+62 21 5081 8913

Spain

Increase in corporate income tax deduction percentage for technological innovation activities related to production processes in the automotive industry value chain

In order to encourage investment in process innovations in Spain’s automotive industry value chain, a royal decree law issued on 23 June 2020, provides a 13-point increase in the corporate income tax deduction percentage (from 12 to 25 percent) for all qualifying activities performed in years 2020 and 2021 (Royal Decree Law 23/2020, article 7).

Eligible participants All companies in the automotive industry that incur expenses in technological innovation activities resulting in technological progress, the creation of new production processes in the automotive industry value chain, or substantial improvements to existing ones
Scheme budget For fiscal periods beginning in years 2020 and 2021, the deduction percentage for innovative processes in the automotive industry is increased to 25 percent (from 12 percent, as generally provided in article 35.2.c) of Law 27/2017 on Corporate Income Tax (LIS))
Type of incentive Increase in the corporate income tax deduction percentage for technological innovation activities related to production processes in the automotive industry value chain (article 7 of RDL 23/2020)
Amount of incentive 25 percent of all expenses incurred in qualifying technological innovation activities may be deducted from corporate income taxes
Application deadline To apply for the deduction, an entity must obtain a report from the Ministry of Science and Innovation verifying that the activity qualifies as technological innovation resulting in technological advancement, the creation of new production processes in the automotive industry value chain, or substantial improvements to existing ones, as required under article 35.4.a) of the LIS
Funding agency Spanish tax authorities (Treasury)
Sources www.boe.es/buscar/act.php?id=BOE-A-2020-6621

 
National funding program to promote industrial development, job creation, and acquisition of fixed industrial assets

REINDUS 2020, a Spanish national funding program established by the Ministry of Industry, Trade and Tourism, aims to promote industrial development, job creation, and the acquisition of fixed industrial assets by funding the following types of projects on a yearly basis:

  • The creation of industrial establishments
  • The relocation existing production activities to any other location within Spain
  • Improvements and/or modifications to production lines
  • The productive implementation of “Connected Industry 4.0” technologies

“Connected Industry 4.0” is a strategic plan developed by the Spanish government to respond to the growing globalization of industry, as well as demand and competitiveness market challenges, by promoting the digital transformation of the Spanish industry through joint action and coordination of the public and business sectors.

Eligible participants All companies that carry out or will carry out a productive industrial activity within the National Classification of Economic Activities (CNAE) 2009 classification (from 10 to 32).
Scheme budget Long-term loans from the Ministry of Industry, up to 75 percent of investment costs
Type of incentive Long-term loans at an interest rate of 0.1 percent for small and medium-sized enterprises (SMEs) and 0.19 percent for large companies, with guarantees of only 20 percent
Amount of incentive All expenses incurred in the following activities:

● Civil works: Investments in urbanization and pipelines (excluding land)

● Buildings: Material investments in the acquisition, construction, expansion, or adaptation of industrial premises not directly linked to the production process

● Acquisition of material equipment directly linked to production

● Engineering
Application deadline Pending opening of the call for proposals
Funding agency Ministry of Industry, Trade and Tourism
Sources https://www.mincotur.gob.es/PortalAyudas/Paginas/convocatorias-ayudas.aspx

Contact your Spanish representative

Omar Garzesi,
director
+34 93 230 4865

Thailand

Incentive for investment in grassroots economy

On 14 May 2020, the Thailand Board of Investment (BOI) issued Announcement No. 6/2563 to promote investment in the ”grassroots economy” to encourage private sector participation in supporting community enterprises in holistic water resource management, and to enhance competition capacity of production or services of local organizations or communities in agriculture and agricultural products, light industries, and community tourism. The announcement applies retroactively as from 13 April 2020. The announcement provides a corporate income tax (CIT) incentive with respect to investment in:

  1. Qualifying projects that are in operation on or before 13 April 2020 (whether BOI or non-BOI projects)
  2. Qualifying projects being promoted for which the applicable CIT exemption period has not yet expired
  3. Eligible new projects under application for promotion

To qualify for the incentive, the projects must provide support to local organizations of not less than THB 200,000 per entity. Projects that already are in operation also must have minimum investment capital of not less than THB 1 million (excluding land cost and working capital). In addition, projects must be completed within three years as from the issuance of the promotion certificate.

Eligible participants Companies investing in qualifying projects
Scheme budget N/A
Type of incentive Income tax incentive
Amount of incentive For projects that are in operation on or before 13 April 2020 (whether BOI or non-BOI projects), the BOI grants a three-year CIT exemption (credit) of not more than 120 percent of the applicable investment capital (excluding land cost and working capital). The amount of the exemption is calculated based on the investment capital actually paid to local organizations. In addition, non-tax incentives apply in accordance with BOI Announcement No. 2/2557 dated 3 December 2014.

For projects being promoted and for which the CIT exemption incentives have not yet expired, or for eligible new projects that are under application for promotion, an additional corporate income tax exemption is granted of not more than 120 percent of the investment capital (excluding land cost and working capital) that is actually paid to local organizations.
Application deadline Applications must be submitted to the BOI by the last business day of 2021
Sources https://www.boi.go.th/upload/content/No.6_2563EN.pdf

 
Import duty exemption on goods imported for research and development

An announcement issued by the Thailand Board of Investment (BOI) (No. 8/2563) on 14 May 2020 grants an import duty exemption on goods imported for research and development (R&D) and related experimentation for a period of one year upon each application. The announcement applies retroactively as from 13 April 2020.

The following R&D-related activities are eligible for the exemption:

  1. Activities on R&D (for example, R&D activities, biotechnology activities, and targeted technology development activities)
  2. Activities that require R&D to be conducted to fulfill conditions as prescribed by the BOI (for example, plant and animal breeding activities)
  3. Activities that require investment in R&D to receive higher incentives (for example additional incentives, either CIT exemption or CIT reduction, granted under measures as prescribed by the BOI’s announcement)
  4. Projects that receive additional merit-based incentives on competitiveness enhancement by conducting R&D
  5. Projects engaging in R&D activities and promoted under Measures to Promote Improvement of Production Efficiency
Eligible participants Companies conducting qualifying R&D and related experimentation activities
Scheme budget N/A
Type of incentive Import duty exemption on goods imported for qualifying R&D and related experimentation
Amount of incentive Import duty exemption for a period of one year upon each application
Application deadline N/A

 
Incentives for investment in medical sector

The Thailand Board of Investment (BOI) issued announcement No. 7/2563 on 14 May 2020 to promote investment in the medical sector, including the manufacture of certain non-woven fabric used as raw materials in the production of medical equipment and hygiene masks, and the manufacture of medical devices and parts, active pharmaceutical ingredients, medicines, and biotechnology. The announcement provides qualifying investors with a maximum 50 percent reduction in corporate income tax (CIT) for an additional three years following the expiration of the CIT exemption period, and supports the adjustment of existing production lines to manufacture medical devices or parts by granting import duty exemptions on machinery. The incentives apply retroactively as from 13 April 2020.

The BOI also has made adjustments to the benefits granted for the following eligible activities:

  1. The production of certain raw materials used in the manufacture of medical products, (for example, pharmaceutical-grade alcohol is eligible for the benefits and rights of A2 and A3 categories, which are entitled to eight-year CIT exemption and five-year CIT exemption, respectively)
  2. The manufacture of non-woven fabrics or hygienic products made of non-woven fabrics is eligible for the benefits and rights of A3 and A4 categories, which are entitled to five-year CIT exemption and three-year CIT exemption, respectively.
Eligible participants Companies engaging in qualifying manufacturing and production activities
Scheme budget N/A
Type of incentive Incentives for investment in the manufacture of medical equipment
Amount of incentive ● A 50 percent reduction in CIT for an additional three years (after the end of the three to eight-year tax holiday period) is granted on qualifying investment in the medical sector, including the manufacture of certain non-woven fabric used as raw materials in the production of medical equipment and hygiene masks, and the manufacture of medical devices and parts, active pharmaceutical ingredients, medicines, and biotechnology. The project must start its production and generate revenue by 31 December 2020. Also, a minimum of 50 percent of the production in 2020 and 2021 must be distributed or donated domestically

● An import duty exemption on machinery imported within 2020 relating to the adjustment of existing production lines to manufacture medical devices or parts

● An eight-year or five-year CIT exemption is granted on production of certain raw materials used in the manufacture of medical products, and a five-year or three-year CIT exemption is granted on the manufacture of nonwoven fabrics or hygienic products made of nonwoven fabrics
Application deadline Applications for the three-year additional 50 percent reduction in CIT for qualifying investment in the medical sector must be submitted to the BOI between 1 January and 30 June 2020.

Applications for the import duty exemption on machinery relating to adjustments of existing production lines must be submitted to the BOI by 30 September 2020.

Contact your Thai representative

Anthony Visate Loh,
partner
+66 (0) 2034 0112

Thirapa Glinsukon,
partner
+66 (0) 2034 0159

Sutthika Ruchupan,
senior manager
+66 (0) 2034 0000

United States

New Markets Tax Credit

On 15 July 2020, the US Department of the Treasury’s CDFI Fund announced USD 3.5 billion of New Markets Tax Credit (NMTC) allocation to be used to spur investment and economic growth in low-income communities throughout the United States. The subsidy is received through low-rate, interest-only loans, with the loan principal typically “forgiven” after a seven-year NMTC compliance period.

Eligible participants Majority of businesses and projects that generate positive community impacts in qualifying census tracts
Scheme budget N/A
Type of incentive Cash incentive
Amount of incentive Tax credit investors receive a 39 percent tax credit in return for funding projects within low-income communities. The business making the investment receives a subsidy in the form of a loan that is typically forgiven after a seven-year period. The amount of the forgivable loan varies, but clients typically receive USD 1.5 million toward USD 10 million of eligible project costs.
Application deadline N/A
Funding agency US Treasury
Sources https://www.cdfifund.gov/programs-training/Programs/new-markets-tax-credit/Pages/default.aspx

Contact your United States representative

Jarick Poulson,
managing director
+1 801 366 6832

Christine Brynaert,
senior manager
+1 312 486 1536

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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