The current development on the possibility to deduct expenses for research and development twice


The tax administrator pays even more attention during tax controls to the deductible item from the tax base in the form of expenses for research and development (R&D). This fact, together with an unclear legal adjustment of this area in the income tax law, is the basis for conflicts between the tax administrator and tax subjects. The Supreme Administration Court (SAC) solves these cases more often.

For more than 10 years, expenses spent on R&D could have been deducted from the tax base like a deductible item. It is necessary to fulfil some basic conditions defined by law to claim this item: after the technical side, the activity has to be in the area of R&D and all necessities have to be filled in, especially processing the written document in the form of an R&D project and the evidence of expenses has to be recorded separately.

As for technical side of the deduction, the SAC is certifying in its conclusions that in the case the Tax Administrator doubts whether the project in question involves some technical uncertainty and an appreciable element of novelty (the basic parameter of R&D), the Tax Administrator is obliged to allow the expert’s process their opinions . Only through this way can the Tax Administrator reliably refute a tax subject´s affirmation, that their project has fulfilled the conditions for classification under R&D activities.

Due to the above-mentioned fulfilment it is problematic for the Tax Administrator in practice, the Tax Administrator focuses on the fulfilment of the formal necessities of the R&D project during controls. According to the SAC´s decisions, this procedure of Tax Administrator is legitimate, because the law defines the formal content and necessity of the R&D projects. If the Tax Administrator does not accept/recognise the deductions only on the basis of formal shortcomings of the given project, then such a procedure cannot be determined to be excessive formalism, which is otherwise forbidden by the Tax Administration. The SAC quotes, that the deduction of expenses for R&D does not imagine a double claim of the object expenses in the tax base, and that is why the legitimate increased requirements for fulfilling all of the formal necessities.

I recommend checking your documentation related to the deductible items for R&D, especially if it fulfils all the formal necessities.

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