The Czech Republic has an R&D scheme providing an additional 100% deduction of eligible R&D costs from the income base, providing a net benefit of 19% on the cost of R&D. A deduction of 110% is available on any incremental increases in annual R&D expenses.
Although the application process seems relatively easy, the regulatory authorities are rather strict in the process of the claim justification. Therefore, detailed internal documentation on eligible projects and eligible costs is strongly advised.
|Czech Republic All Companies|
|Volume-based: 100% Tax Credit Incremental: 110% tax credit on all QE > previous year|
||The Czech Republic’s R&D tax credit regime is generic in nature, covering a wide scope of eligible activities and offering a common rate to all types of companies. There is a more generous benefit for 110% for any incremental R&D expenditure, when compared to the previous year.|
|Eligible Claim Period
||Only the eligible costs a company incurred during the prior fiscal year are eligible. The tax credit must be claimed within 3-6 months of the end of the accounting period for the year in which the expenditure occurred.|
||The law came into force in 2005 and in recent years, there have been three legislative changes. The 2014 amendment led to increase of R&D deductible costs up to 110%, when an annual increase occurs (110% of the increase, 100% of the last year’s costs). The 2016 amendment allowed for claims of 100% of costs of R&D product certification, if legislatively needed. The 2019 amendment led to a major change in the approval process of project documentation and introduced the obligation to keep detailed record of changes.|
|Ease of Application
||According to the Act’s requirements, there are three obligatory conditions:
|Regulating Body Policies
||Fiscal controls are carried out by tax authorities. The Act is managed by the Ministry of Finance. To apply for the tax deduction, only the sum of the year’s eligible costs has to be declared in the tax declaration. In case of fiscal audit, the taxpayer is obliged to provide the required documents (as above).|
|Issues to Consider||