15 Jun 2020
Tax News, June

Significantly increased Danish tax deductions for R&D expenses in 2020 and 2021

By EY Denmark

Multidisciplinary professional services organization.

15 Jun 2020
Related topics Tax COVID-19

On 15 June, the Danish Government and certain political parties constituting a parliamentary majority concluded a political agreement introducing, among other measures, increased deductions for R&D expenses incurred in 2020 and 2021. The initiative forms part of the COVID-19 stimulus measures. It is meant to encourage R&D investments for the benefit of Danish exports, but it is not a condition that the R&D investments be export related. 

D
eductions for R&D expenses are increased from 103% (2020), respectively 105% (2021), to 130% (both years). The additional deductions following the increase will be capped at DKK 50m for each group.

By way of example, a business that incurs DKK 1,000,000 in R&D expenses in 2020 would – subject to the current deduction rate – be entitled to a deduction of DKK 1,030,000. Following the enactment of the new measure introduced by the political agreement, the corresponding deduction will be increased to DKK 1,300,000.

Consequently, businesses that have long term R&D investment plans may consider implementing such R&D projects in 2020 and/or 2021 rather than in later years to reap the benefits of this temporary tax stimulus measure.

The bill introducing the increased R&D deductions has not yet been made publicly available.

The political agreement is available (in Danish) here.

The R&D incentive has been introduced to improve the companies’ competitiveness in Denmark. When considering incentives, a company’s view on R&D can often be much narrower than what the R&D framework incentivizes. More R&D costs than defined in the accounting standards qualify as R&D for tax purposes.

Our industry-experienced engineers and scientists are able to quickly understand companies’ business — maximizing the activities companies can include in their claim. Together with our tax specialists, we can provide support on various matters ranging from planning R&D activities to submitting successful applications and obtaining the tax benefit through the tax return.

Contact
If you have any questions or would like to explore how your business can benefit from this R&D incentive, you can contact Marcel Sikkema, EY Nordic Quantitative Services Leader (+46 73 340 7782),  your regular EY advisor or Tobias Steinø (+45 2529 4197).

Summary

On 15 June, the Danish Government and certain political parties constituting a parliamentary majority concluded a political agreement introducing, among other measures, increased deductions for R&D expenses incurred in 2020 and 2021. 

About this article

By EY Denmark

Multidisciplinary professional services organization.

Related topics Tax COVID-19