Court rejects possibility of increasing investment incentive tax credit through discounting

In case 31 Af 2/2020- 77, the court dealt with a taxpayer who through an additional tax return decided to claim a corporate income tax credit based on an investment incentive granted. The taxpayer believed that they had the legal right to discount it. The tax administrator did not accept this approach. The taxpayer then appealed the tax administrator’s decision, arguing that the relevant provisions of EU law had been misinterpreted and that the aim of the legal regulation of discounting had not been respected.

The taxpayer had an analysis prepared which concluded that under the EU law, namely Commission Regulation (EU) No. 651/2014 of 17 June 2014 (GBER), state aid payable in the future, as well as relevant eligible costs, should be discounted to their value at the time of granting the aid, using a discount rate applicable at the time of granting the aid, even where the decision on granting an investment incentive did not allow for the discounting of the cost or of the individual amounts of the investment incentive in form of a tax credit. The taxpayer believed that they had the right to discount the public aid granted, as the GBER takes precedence over a different national legislation.

The tax administrator disagreed, concluding that the tax credit claimed in the additional tax return was not justified, as the taxpayer exceeded the nominal value of the maximum amount of investment incentives as stipulated by the decision on granting the investment issued by the Ministry of Industry and Trade. The Regional Court upheld this view, stating, among other things, that the decision on granting the investment incentive stipulates the admissible aid intensity and amount, as well as specific rights and obligations of the investment incentives beneficiary. It is not possible to increase the tax credit solely through discounting. The taxpayer filed a cassation complaint against the Regional Court’s decision. We will inform you of further developments once the Supreme Administrative Court rules on the case.

Considering the above, we may conclude that when claiming aid under investment incentives, it is necessary to follow the decision on granting the investment incentives issued by the Ministry of Industry and Trade, which lays down the conditions under which public aid may be used as well as the insurmountable total amount of tax credits. KPMG considers increasing the investment incentive tax credit solely by discounting risky and does not recommend it to its clients.