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Czech Republic: R&D allowances, requirement changes proposed

Czech Republic: R&D allowances, changes proposed

Changes to the research and development (R&D) allowance rules have been proposed as part of a tax package that has already been passed by the Chamber of Deputies and is pending consideration by the Senate.


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One change to the R&D allowance rules would be to postpone the deadline for preparing and approving a project until the end of the time limit for filing a tax return for a period in which the taxpayer claimed an R&D allowance for a particular project for the first time. Under the proposed amendment, taxpayers would have to notify the tax administrator about their intention to claim an R&D allowance for a particular project before the project commences. If they fail to do so, expenses incurred for this project would not be allowed to be included in the allowance. The notification would need to contain certain basic identification about the taxpayer (company name, address, tax identification number) and the name and focus of the project. 

Another change would be a project could be approved not only by a company’s governing (statutory) body but also by a person authorised by the governing body. It would no longer be required for the taxpayer to specify the place where the project was approved. 

If enacted, it is expected that the amendment’s measures would be effective in the first half of 2019. The new requirements would apply to projects initiated after the effective date. For projects started on or before the effective date, taxpayers would be allowed to elect to apply either existing or new rules.

Read a January 2019 report prepared by the KPMG member firm in the Czech Republic

Court opposed to tax administrator’s approach to R&D allowance

The Regional Court of Justice in Hradec Králové, in a case concerning the tax administrator’s challenge of the R&D allowance claimed by a taxpayer, disagreed with the tax administrator’s conclusion on when work on the R&D project had started. The case demonstrates the taxpayer’s duty to maintain separate records of project costs and confirms that if there are doubts as to the presence of a valuable element of novelty or technology uncertainty, an expert witness must be appointed.

Read a January 2019 report prepared by the KPMG member firm in the Czech Republic

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