Odpočet na podporu výzkumu a vývoje – formální náležitosti projektu

Deduction to support research and development - project formalities

In a recent judgment (5 Afs 56/2024 - 70), the Supreme Administrative Court examined whether the conditions for claiming the R&D deduction were met.

One of the important conditions under the then wording of the law was the approval of the research and development project prior to its start. The administrative authorities doubted that this condition was met because the R&D activities were not mentioned in the company's annual report for the relevant period and because the project was prepared on the basis of a template from a consultancy company with which the company entered into a contract only after the project had allegedly started.

The Court further emphasised that the project must contain clearly specified objectives which are achievable and evaluable after its completion. However, the objectives of the project were defined in very general and brief terms.

The project should include a list of names of all persons who will be professionally involved in the project and whose salary costs are expected to be included in the deduction, not only the professional management staff, but also e.g. professional lab technicians, developers, professional technicians, scientists, etc. The taxpayer should also be able to explain the unforeseen circumstances that led to the involvement of a worker not included in the project. In this particular case, these conditions were not met. According to the company, more people were involved in the project than were listed in the project and, according to the court, the statements of work contained a number of inaccuracies.

The Supreme Administrative Court therefore concluded that the research and development project did not fulfil the formalities required by law, which, according to the court, was sufficient to reject the claim for deduction.

This decision is yet another in a series of cases where the deduction has been disallowed for failure to comply with the formal requirements, and therefore the administrative authorities no longer addressed the question of whether the research and development carried out met the criteria laid down by law. It is therefore important not to underestimate both the preparation of the project and the related supporting documentation.

If you have any questions, please contact the authors of this article or the EY tax team with whom you regularly work.

Authors:

Martin Hladký

Veronika Kruttová