The tax deduction for research and development, technological innovation, design and aesthetic ideas

The main stimulus for companies to implement technological and digital innovation projects is undoubtedly represented by tax benefits recognized by the National Transitional Plan 4.0.

For several years now, the country’s industrial policy program has supported the competitiveness of national companies by focusing on innovation as a characteristic factor that must be strengthened and promoted, and this is done through the instrument, among other things. tax deduction.

The tax deduction is recognized for all companies operating in the national territory and investing in:

  • tangible assets 4.0
  • intangible assets 4.0
  • training activities 4.0
  • research and development, technological innovation, design and aesthetic design

You can find more information about the tax deduction for tangible and intangible assets and for educational activities 4.0, here.

The discipline of the tax deduction for research and development activities has been subject to change over the years, and there are several clarifications that the Danish Tax Agency had to publish to clarify the specific aspects.

Until 2019, the tax deduction rate applied to the difference between the total amount of expenditure on investment in research and development and the arithmetic average of the same expenditure realized in the three tax periods prior to the current 31 December 2015 (2012-2014)) or in the shorter reference period in the case of start-ups.

The current legislation has instead abandoned this cumbersome mechanism and has expanded the type of eligible investments, including not only research and development activities, but also technological innovation activities (including 4.0) and design and design activities.

The current eligible activities concern:

  • basic research, industrial research and experimental development
  • technological innovation aimed at creating new or significantly improved products or production processes
  • technological innovation 4.0 and green as activities aimed at creating new or significantly improved products or production processes to achieve a goal of ecological transformation or digital innovation 4.0
  • design and aesthetic concept aimed at significantly innovating the company’s products in terms of shape and other non-technical or functional elements (lines, contours, colors, surface texture, ornaments)

The criteria for the correct application of these definitions are dictated by Art. 4 of the Decree of 26 May 2020 from the Ministry of Economic Development.

That rates of the tax deduction differ according to the type of permitted activity that the company has performed.

Prices for 2022:

  • basic research, industrial research and experimental development: tax deduction corresponding to 20% up to a maximum annual limit of 4 million euros
  • technological innovation activity: tax deduction corresponding to 10% up to a maximum annual limit of 2 million euros
  • 4.0 and green technological innovation activities: tax deduction corresponding to 15% up to a maximum annual limit of 2 million euros
  • design and aesthetic idea activities: tax deduction corresponding to 10% up to a maximum annual limit of 2 million euros

Eligible expenditure

  • Expenditure related to staff in ancillary employment, self-employment or non-ancillary activities, directly employed in the activities
  • depreciation, financial leasing or simple leasing payments and other expenses related to movable property, plant and equipment and software used in the projects
  • expenditure on contracts relating to the direct performance by the Commissioner of the activities eligible for tax deduction;
  • expenditure on consultancy services and similar services
  • expenditure on materials, supplies and other similar products

How to access the tax deduction

The tax deduction can be used:

  • exclusively in compensation through the F24 form
  • starting from the tax period after the one in which the costs are incurred
  • subject to fulfillment of the required certification obligations

The tax deduction must be stated in the tax return relating to the tax period in which the expenses are incurred and in those relating to subsequent tax periods until the use is completed.

In addition, companies are required to develop and retain one sworn technical report illustrates the purpose, content and results of the eligible activities carried out in each tax period in relation to the ongoing projects or sub-projects. This report must be prepared by the company manager for the permitted activities or the manager of the individual project or sub-project and must be co-signed by the company’s legal representative. For eligible activities commissioned to third parties, the report must be prepared and sent to the company by the commissioner carrying out the activities.

The actual incurring of eligible expenses must then be shown in a specific certification issued by the person responsible for the statutory audit. For companies that are not required by law to perform statutory audits, the expenses incurred to fulfill the certification obligation are recognized as an increase in the tax deduction of up to EUR 5,000.

It is also anticipated that a notification will be sent to Mise, which, however, does not constitute a precondition for the use of the tax deduction. The data and information contained therein are obtained by the Ministry of Economic Development for the sole purpose of assessing the progress, dissemination and effectiveness of the subsidy measures. Failure to submit the model will in no way determine effects in the tax authorities’ control of the correct application of the subsidy provisions.

Can be combined with other concessions

The tax deduction for research and development activities may also be applied to other favorable measures, unless the rules for the other measures provide otherwise.

For more information on accumulating incentives set by PNNR, read this articleor.

Recent updates

With the Executive Order no. 73 of 21 June 2022, the government introduced the possibility for companies to request one certification to witness qualification of the investments made o shall be performed for the purposes of their classification in the fields of research and development, technological innovation and design and aesthetic innovation eligible for the service.

A similar certification can be requested for certification of qualification of technological innovation activities aimed at achieving digital innovation 4.0 and ecological transition objectives in order to apply the credit rate increase.

Then we introduce one protection tools for companies against the risk of sanctions for non-existent credit and non-overdue credits, which we remember involves both an administrative sanction and a criminal implication.

However, certification may be requested, provided that the infringements concerning the use of tax deductions have not already been established and in any case no access, inspections, verifications or other administrative assessment activities have been initiated. A subsequent executive order identifies the requirements that the public or private bodies authorized to issue the certification are suitable for guaranteeing professionalism, integrity and impartiality, and establishes a special register of certification bodies maintained by the Ministry of Economic Development. .

Research and development

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