Controversial issues of claiming R&D allowance

On 22 June 2022, the Supreme Administrative Court (SAC) issued an interesting judgment dealing with the application of a research and development allowance. The SAC commented on two controversial issues: the concurrence of receiving a subsidy and claiming the allowance and allowing the tax administrator to take away technical documentation for a R&D project or its copy for the purpose of verifying the element of novelty.

On the issue of the concurrence of receiving a subsidy and claiming a research and development allowance within one project, the SAC emphasised that current legislation allows this possibility, but the subsidy and the allowance may not involve the same costs. Therefore, project costs/expenses not (even partially) covered by a subsidy can be claimed within the R&D allowance.

When assessing which cost/expense items are supported within the subsidy, the content of the decision or contract on granting the subsidy is essential, whereby the subject matter of the subsidy and the extent and purpose of the provided funds are defined. The SAC thus concluded that it was not decisive which cost/expense items were actually paid from the subsidy, as the taxpayer erroneously believed. Instead, decisive is which items were defined as eligible costs/expenses in the contract on granting the subsidy.

On the second issue, the court assessed whether the taxpayer had sufficiently demonstrated the presence of an appreciable element of novelty or clarification of a research or technical uncertainty in one of its R&D projects. Despite repeated requests, the taxpayer did not hand over the relevant technical documentation for the project or its copy to the tax authorities due to fears for their know-how. The taxpayer merely stated that all documents were available to the tax authorities at the company's registered office.

The SAC uncompromisingly concluded that the taxpayer failed to bear the burden of proof as regards demonstrating the element of novelty. This means that, during a tax inspection reviewing a R&D allowance, taxpayers must make the relevant documentation available to the tax administrator.

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