Austria: Related Information
Special Corporate Income Tax Regimes
Research & Development Investment Allowance Deductions
An additional tax deduction of 25% is granted for expenditure incurred on research. If the research expenditure for a year exceeds the average expenditure in the preceding three years, the percentage of the additional deduction for the amount of the excess is 35%.
Thus a company spending USD3m per annum on allowable research and development could find itself deducting USD3.75m or USD4.05m from profits for the purposes of an assessment to corporate income tax. Clearly this provision represents a substantial fiscal concession.
The concession applies to expenditure on research and development of economically viable inventions. To qualify for the allowance the invention must have a certificate from the Ministry of Economic affairs unless it is already protected by patent. This is to certify that the invention is of economic value and not just a means of reducing taxable income.
The allowance does not cover all research and development expenditure. The expenditure must be directly related to research and therefore only covers expenditure incurred on raw materials, staff wages or other auxiliary materials. It does not cover expenditure incurred on fixed assets (e.g. the purchase of machinery) or expenditure incurred on administrative activities (e.g. the employment of an accountant).
An additional allowance of 25% of expenses for research carried out by third parties may be deducted. However, companies must apply to the Austrian Research Promotion Agency for approval of the R&D project, if approved, the deduction is limited EUR1m per year.
Alternatively, a company can apply for a cash bonus of 8% of R&D expenditure.