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Czech Republic: Employee vacation compensation included in R&D tax allowances

Czech Republic: Employee vacation compensation, R&D

A regional court (in Hradec Králové) issued a decision in a case concerning the tax allowances allowed for research and development (R&D). The regional court held that compensation paid to employees during their vacation was part of payroll expenses eligible for the R&D tax allowances.


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The case identifying number is: No. 31 Af 23/2016-76

The court found that the amount of compensation paid employees for vacation time was an obligatory, statutory cost of work—that is, the same as wages or social security and health insurance payments, all of which are included in the R&D tax allowances. According to the court, there was no rationale for treating vacation compensation any differently. The court found the compensation paid for vacation time would only be reduced for R&D tax allowances purposes when the employee also conducted other activities that were not related to the R&D project.

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

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