R&D Tax Incentives : Denmark, 2019 · 2020-01-29 · Figure 3. Direct government funding of business R&D and tax incentives for R&D, Denmark, 2000-17 As a percentage of GDP, 2010

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R&D Tax Incentives : Denmark, 2019 Design features

Table 1. Main design features of R&D tax incentives in Denmark, 2019†

R&D tax credit for deficit related R&D expenses

Enhanced R&D tax allowance Accelerated Depreciation

Tax incentive* Tax credit Tax allowance Accelerated Depreciation

of R&D capital

Type of instrument Volume-based Volume-based

Eligible expenditures† Current, depreciation Current, depreciation Machinery and equipment

Headline rates (%) 22 (corporate income tax rate) 1.5 (income years 2018-19)* 100

Refund Yes (deficit related R&D expenses)

Carry-over (years) n.a. Indefinite

Ceilings R&D expenditure (Refund-specific)

DKK** 5.5 million (22% of DKK 25 million) per year

*This rate is raised to 3% in 2020, 5% in 2021-22, 8% in 2023-25, and 10% in income year 2026. ** 1 DKK= 0.134 EUR (Q3 2019)

Recent developments and trends

Figure 1. Implied tax subsidy rates on R&D expenditures: Denmark, 2000-19 1-B-Index, by firm size and profit scenario

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-0.03

-0.01

0.01

0.03

0.05

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

1-B-index Large, Profitable SME, Profitable Large, Loss-Making SME, Loss-Making

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Public support for business R&D: the policy mix

Figure 2. Direct government funding of business R&D and tax incentives for R&D, 2017 (nearest year) As a percentage of GDP

Trends in government support for business R&D

Figure 3. Direct government funding of business R&D and tax incentives for R&D, Denmark, 2000-17 As a percentage of GDP, 2010 prices (right-hand scale)

0.00

0.10

0.20

0.30

0.40

0.50

0.60

% Direct government funding Tax incentive support Subnational tax incentive support Total 2006 (excl. subnational tax support)

* Data on tax support not available, ** Data on subnational tax support not available

0

50

100

150

200

250

300

350

400

450

0.00

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

2010DKKm % Direct funding Tax incentive support Data on tax support not available

Direct funding imputed R&D tax support (right-hand scale)

The cost estimate of tax incentive support covers the R&D tax credit