Business support – tax deduction for research and development in the Czech Republic

Are you a company that does business in technology, develops software, or seeks new solutions? In that case, you can deduct the costs of your own research and development from your income tax base—twice.

The Czech tax system allows entrepreneurs to claim a research and development deduction, which can significantly reduce their tax liability. The conditions are that the activity must be carried out with an uncertain outcome, aimed at acquiring new knowledge or solutions, defining the project, keeping basic documentation, and meeting several other requirements. A properly set up project can bring savings in the range of hundreds of thousands to millions of crowns per year.

What is a tax deduction for research and development? 

The research and development tax credit allows companies to reduce their income tax base by certain types of costs associated with the implementation of research and development projects. These costs can be claimed twice: first as ordinary tax-deductible expenses and second as a deductible item from the tax base.

Who can take advantage of the deduction? 

Any corporate income tax payer that carries out research and development projects. The size of the company and the amount of expenditure incurred are irrelevant. 

Amount and application of the deduction 

Up to 150% of eligible R&D costs for a given calendar year
Unused deductions can be carried forward to up to five subsequent tax periods

Basic requirements for claiming the deduction

The intention to claim the deduction must be notified in advance to the tax office in the form of a Notification of Intent to Claim a R&D Deduction ("Notification") for each project separately. The project can also be notified later, but only costs incurred from the date of the Notification will be recognized.
The project contains an element of novelty and addresses technical uncertainty.
The company will prepare project documentation that meets the legal requirements (in particular, the project objective, start and expected end date of the project, planned expenses, overview of employees involved in the project, method of control and evaluation). This documentation may be linked to existing internal company documents.

The project documentation must be prepared no later than the deadline for filing the tax return for the first year in which the deduction is claimed, i.e., in our experience, there is sufficient time to prepare it. 
In the case of a longer-term project, it is necessary to monitor and document changes to the project documentation. However, if the project objective changes, it would be necessary to report a new research and development project.
The company keeps records of eligible costs (separately for each R&D project), including an overview of the hours spent by employees on the project.

Which costs can be claimed 

Personnel costs for employees working on the R&D project (salaries, social security contributions). 
Tax depreciation of fixed assets used for R&D. 
Other direct operating costs – materials, supplies, energy. 
Travel expenses for the above-mentioned employees. 
Costs must be directly related to the project and kept separate from other costs (however, it is not necessary to account for them separately – conclusive internal records are sufficient).

Costs that CANNOT be claimed 

Costs covered by public funds (grants, etc.). 
Costs for purchased services or R&D results from other entities (except for purchases from public research institutions and universities). This means that costs such as agency staff or services provided by external developers or consultants cannot be included.
Licenses and fees for the use of intellectual property rights.

How can we help you? 

In close cooperation with our expert and together with you, we identify research and development activities for which it will be possible to apply the R&D tax credit
Before you start preparing your R&D documentation, we will help you analyze potential tax savings.
If you are considering a subsidy, we will help you evaluate the related impacts on your R&D deduction. Together, we will set up the optimal solution for simultaneous drawing.
If you decide to apply for an R&D tax credit, we will help you prepare the notification for the tax office and set up a system for ongoing recording of R&D costs.

We will help you calculate the amount of your research and development tax credit.  
We prepare project documentation and change documents for longer-term projects.  
If you are interested, we can arrange for an expert opinion to be prepared. The purpose is to confirm the presence of an element of novelty and technical uncertainty.
We will support you in the event of a tax audit by the tax office.

Business support – tax deduction for research and development in the Czech Republic

Business support – tax deduction for research and development in the Czech Republic

What is a tax deduction for research and development?

Who can take advantage of the deduction?

Amount and application of the deduction

Basic requirements for claiming the deduction

Which costs can be claimed

Costs that CANNOT be claimed

How can we help you?

Main contact persons

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