New deductible item to support R&D

25.4.2019

Tomáš Klíma
tomas.klima@moorestephens.cz

From 1 April 2019, a new regulation applies to a deductible item to support research and development (R&D). The state interprets this novelty as a helpful gesture towards taxpayers. The new regulation should eliminate the excessive severity of tax officials when using this option. What has really changed?

The fundamental change is that an R&D project no longer has to be approved before the actual work commences. If a company wants to deduct the costs of an R&D project, it must:

• First notify the tax administrator. The notification must indicate, in addition to its precise identification, a project name reflecting its general focus.
• Approve project documentation by the deadline for filing a tax return.

The change responds to a practical problem where companies did not have enough information before starting work and therefore were completed retroactively. The decisive factor for cost deduction will be the “dispatch date”. The project documentation itself can be processed up to the deadline for filing a tax return, when the project can be processed in more detail and more accurately.

It will be possible to make changes and additions to the project documentation, but it will not be possible to change the project name and goals.

One thing that has not changed is the formal criteria. In addition to a minor change, the project must contain all the required data. On the contrary, it is emphasised that both the notification and the project documentation must be processed separately for each project.

In recent years, tax administrators mostly zero in on R&D due to formal errors. Here the amendment does not change the rules. So let us not be lulled to sleep, but rather continue to observe all legal documentation requirements.

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