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GFD admits a looser interpretation of transitional provisions on R&D allowance

The General Financial Directorate (GFD) published information on the application of transitional provisions of the tax package that entered into effect on 1 April 2019. It mainly concerns research and development allowances and regulates the application of transitional provisions to development projects. The described approach nevertheless differs from recommendations that firms are currently applying.

According to the most frequent interpretation, the new rules shall apply to projects initiated after the amendment’s effective date, i.e. after 1 April 2019, while their application is optional for projects initiated from 1 January 2019 to the end of March 2019. Projects initiated before this time should be governed by the original rules, i.e. the wording before the amendment.

The GFD’s information, however, admits a more benevolent interpretation of the transitional provisions: it allows to choose the applicable rules for all projects initiated in the taxable period or a period for which a tax return is filed that commenced before the tax package’s effective date and did not end by the effective date. This means the beginning and the end of the taxable period in which the development project was initiated is of key importance.

To recap, for taxpayers, the new rules have also brought a duty to notify tax administrators of the intention to claim the research and development allowance for a project even before initiating it. At the same time, the preparation and approval of the project documentation may be postponed until the deadline for filing the tax return for the period when the taxpayer first claims the allowance for the project.