Introduction of the refundable tax credit for research and development (R&D) expenses

Prior to the entry into force of the new provisions, the incentive for R&D activities could be applied by taxpayers carrying out applied research and/or experimental development activities. Such taxpayers were entitled to apply an additional deduction of 50% of eligible expenses when determining the taxable result, as well as the accelerated depreciation for equipment and machinery used in R&D activities.

The new R&D provisions introduce the option to apply a 10% tax credit on eligible R&D expenses, as an alternative to the additional deduction.

The main features of this new incentive are:

• The tax credit is determined by applying the 10% rate to the eligible R&D expenses and can be applied as an alternative to the existing additional deduction, based on the taxpayer’s option.
• The credit is deducted from Corporate Income Tax or from the minimum turnover tax, depending on the regime applicable to the taxpayer.
• If the tax credit exceeds the tax due, the difference may be offset against other tax liabilities or refunded.
• The taxpayers’ right to request the refund of the tax credit difference is subject to a special statute of limitations of four (4) years, which begins to run from the first day of the fiscal year following the one for which the tax credit is determined.
• The difference in tax credit that is offset or refunded is considered non-taxable income.

The introduction of the R&D tax credit is implemented in the context of aligning the national tax framework with the new international requirements on the global minimum tax (Pillar II - OECD/GloBE). Accordingly, the R&D tax credit qualifies as a refundable tax credit that does not negatively impact the effective tax rate.

With the above in mind, we recommend:

• Analysis of the company’s specific situation to identify potential activities carried out in the field of R&D.
• Comparative evaluation of the two tax facilities to identify the most advantageous option.
• Monitoring the procedure for implementing the tax credit and the related methodological norms.
• Analysis of the implications of the tax credit and the additional deduction for R&D in the context of the rules brought by the global minimum tax.

Our team is at your disposal to analyse the specific implications of the new tax facility and to support you throughout the application and compliance process.

For further details, please contact us below.