TAX TREATMENT OF RESEARCH & DEDEVELOPMENT AND TRAINING 3rd Meeting of the SEE Working Group on Tax Policy Analysis 10-11 June 2010, Sofia Dubravka Sekulic Grgic Croatian Tax Administration
TAX TREATMENT OF
RESEARCH &
DEDEVELOPMENT AND
TRAINING 3rd Meeting of the
SEE Working Group on Tax Policy Analysis
10-11 June 2010, Sofia
Dubravka Sekulic Grgic
Croatian Tax Administration
Overview of the tax treatment of R&D and training
Tax treatment of R&D-legal entities
Tax treatment of R&D-natural persons
Tax treatment of intangible (“knowledge” capital)
Tax treatment of training
Content
General – State Aid System in Croatia is harmonized with a EU rules and it includes State Aid for R&D and training.
Legal framework: Special regulations which for State Aid System, special
regulations for State Aid for science and education Investment in R&D projects and training are stimulated with tax relief's as
additional deduction of tax base for the project expenses R&D tax incentives for:
legal entities (corporations) - paying 20% of profit tax/investing in R&D projects authorized by the official Ministry of science.
Natural persons – performing entrepreneur activities – paying income tax (15%, 25%, 35% i 45%/ new proposal, 12%, 25% i 40%)
Overview of the tax treatment of R&D end training
Tax treatment of R&D-legal entities
Tax base deduction for
R&D
Up to 150%
justified costs for basic research
Up to 125 % justified costs
For implementation Of research
Up to 100 % justified costs
for development
What are justified costs for R&D? Employers salaries and fees Material costs for R&D (energy, raw materials) Services cost (Intellectual services and others.) Depreciation cost, real estate, facility and
equipment cost for R&D projects Depreciation cost for acquired patents and
licenses General costs (example: insurance premium of
process)
R&D
Natural persons/entrepreneurs which are solely performing businesses and investing in R&D
Tax relief R&D = deduction of tax base additionally for 100% justified costs for R&D
Result– lower of tax liability for income tax
COSTS / TAX RELIEFS for R&D
salaries
Material and services costs
Depreciation cost of tangible assets
Depreciation cost of intangible assets
General expenditures
Research and Development- natural persons
/entrepenours
No special tax treatment for intangible assets (patents, licenses)
Tax-justified cost for intangible asset –
Depreciation annual rate (4 year) 25% cost
Note : Depreciation cost of patents and licenses for R&D can be additionally deducted from the tax base for 150%
Intangible (“knowlege”capital)
TAX TREATMENT OF ROYALTIES ON INTELECTUAL PROPERTY RIGHTS
Royalty payment to non-residents – withholding tax15%
Croatia is applying 47 double tax treaties
EU rules – no taxation of royalties payments if associated enterprises – Croatia will start to implement it by the day of accession
Intangible
Tax incentives for training = additional deduction of profit tax base for training costs
It refers on investment in general education and education of employees
Tax incentives for: income taxpayers: small, medium and large enterprises
Special treatment for small and medium enterprises
Result = lower profit tax liability
Education and Training
Education Training
LARGE COMPANIES
Tax base deduction for 50% expense/general education
Tax base deduction for 25% expense/special education
SMALL AND MEDIUM COMPANIES
Tax base deduction
for 70% expense/general education
Tax base deduction for 35% expense/special education
Education and Training
General Education – Eligible costs
Scholarship fees
Seminars, courses and congresses
Lectures and instructors
Literature
Depreciation costs of assets for general education
Special education –Eligible costs
- Seminars, courses and congresses
- Education specialization
- Lectures and instructors
- Profession literature
- Amortization of devices and accessories
Education and Training - VAT
VAT EXEMPTIONS IN CROATIA:
Education of children and youth, services and deliveries of pre-school , elementary, secondary and tertiary institutions and student and pupil standard of living institutions, professional education and adult prequalification, including related deliveries of goods and performed services which are rendered by public authorities
Classes performed by private teachers (education in pre-school , elementary, secondary and tertiary institutions )
VAT- INTANGIBLE CAPITAL
VAT TAX EXEMPTIONS ON IMPORTS
Import of goods intended for research, analysis and testing, which are destroyed after use under conditions prescribed by customs regulation
Import of imprint, brand names, patents, models and accompanying documents and forms for the acknowledgement of patents or inventions that are sent to organizations for the protection of authors and individual property , in conjunction with conditions prescribed by the customs regulations
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