Tax incentives in Croatia for research and development
(R&D) projects were granted between 2007 and 2014 based on
Articles 111 a. to 111 f. of the Act on Scientific Activity and
Higher Education. However, the European Union issued Commission
Regulation (EU) No. 651/2014 in June 2014, concerning certain
categories of state aid; this used significantly different
terminology, definitions, and requirements, and rendered the
abovementioned articles invalid. Croatian entrepreneurs found
themselves in something of a vacuum for more than three years,
awaiting a new legal framework for R&D incentives, as the
relevant tax incentive had been abolished on January 1 2015. In
July 2018, the Croatian Parliament adopted and published the
Act on State Aid for Research and Development Projects, which
the government had submitted in January 2018.
In July 2018, Parliament passed the long-awaited Act on
State Aid for Research and Development Projects (Official
Gazette Narodne Novine No. 64/18), effective from July 26 2018.
The Act aims to increase the presence of the private sector in
R&D, as well as to increase the overall number of
entrepreneurs investing in R&D. Based on this Act, in order
to qualify for this incentive, R&D activities must conform
to certain criteria:
- New knowledge (as a purpose of the
activity);
- Creativity (new concepts, ideas, and
methods which improve existing knowledge);
- Uncertainty in terms of outcome;
- Systematic (planned with track records);
and
- Transferable (outcomes are transferrable
as new knowledge) and/or repeatable (it is possible to repeat
outcomes).
The state aid for R&D takes the form of tax relief,
decreasing the taxable base for income tax for justified
R&D project expenses as well as feasibility study
expenses.
Subjects eligible to apply for this state aid are legal and
natural persons and corporate or personal income taxpayers, and
it is available to all business sectors and scientific and
technological areas. The Act also indicates specifically which
categories of entrepreneurs do not qualify, in line with
Commission Regulation (EU) No. 651/2014.
The implementation duration of the project for which the aid
is requested may be up to three years from the beginning of the
project.
The maximum state aid for particular R&D project
categories is:
- 100% of acceptable project expenses for
basic research;
- 50% of acceptable project expenses for
industrial research;
- 25% of acceptable project expenses for
experimental development; and
- 50% of acceptable expenses for feasibility
studies.
Under certain circumstances, state aid for industrial
research and experimental development may be increased to a
maximum of 80% of acceptable expenses. The level of state aid
for feasibility studies may be increased by 10 percentage
points for medium-sized entrepreneurs and 20 percentage points
for small entrepreneurs.
The total amount of state aid that a beneficiary can receive
under this Act is as follows:
- Prevailingly basic research: up to
€300,000 ($346,000) per entrepreneur/per project;
- Prevailingly industrial research: up to
€200,000 per entrepreneur/per project;
- Prevailingly experimental development: up
to €100,000 per entrepreneur/per project;
- Feasibility studies in the preparation of
research activities: up to €50,000 per study, all in
Croatian kuna (HRK) counter value.
Within 90 days of the enforcement of the Act, the Ministry
of Economy, Entrepreneurship and Crafts will issue relevant
ordinances and bylaws regarding: implementing the Act and
prescribing the modalities of the application for the state aid
in question; eligibility evaluation criteria; the process of
granting the aid; required tracking records; and supervision of
project implementation, expenses, and similar matters.
Silvia Cancedda and David Jakovljevic (zagreb@eurofast.eu)
Eurofast
Tel: +385 1 7980 646
Website: www.eurofast.eu