Expansion of R&D super deduction to additional industries, including renewable energy and advanced manufacturing

• Simplified tax filing processes for SMEs
• Estimated tax benefits: ¥450 billion

Higher deduction rates expected for key industries, including AI, semiconductors, and green energy

• Further tax relief policies planned for foreign-invested R&D centers
• Estimated tax benefits: ¥500 billion

Tax Credit Rate: Companies could benefit from a tax credit of up to 50% of the increase in annual R&D expenses compared to the average expenditure in the previous three years. The minimum investment required to qualify was €30,000 per year, with a maximum annual credit of €20 million per beneficiary.

Eligible Expenses: Qualifying costs included:

• Personnel involved in R&D activities.
• Depreciation of instruments and laboratory equipment.
• Research conducted in collaboration with universities or research centers.
• Technical expertise and industrial patents.

Policy Enhancements: The Italian government introduced the 'Transition 4.0' plan, replacing previous incentives with a new package aimed at supporting technological advancement. The updated R&D tax credit now covers not only traditional research activities but also technological innovation and design projects.

Tax Credit Rates: The new structure offers varying credit rates depending on the type of activity:

• R&D Activities: Tax credit of 20% of eligible expenses, up to a maximum of €4 million.
• Technological Innovation: Tax credit of 10%, increased to 15% for projects aimed at ecological transition or digital innovation, with a cap of €2 million.
• Design and Aesthetic Ideation: Tax credit of 10% of eligible expenses, up to €2 million.

Tax Credit Rates:

• Large Companies: Eligible for a tax credit of 1% of qualifying R&D investments.
• Middle-Scale Companies: Eligible for a tax credit of 5% of qualifying R&D investments.
• Small and Medium-Sized Enterprises (SMEs): Eligible for a tax credit of 10% of qualifying R&D investments.
• An additional credit of 3% (up to twice the basic credit amount) was available for incremental investments exceeding the average investment of the previous three years. For investments in facilities to commercialize new growth and source technologies, higher rates of 3% (large companies), 6% (middle-scale companies), and 12% (SMEs) applied.
• National Strategic Technologies: Investments in national strategic technologies, such as semiconductors, secondary batteries, and vaccines, received a basic tax credit of 15% for large companies and 25% for SMEs. An additional tax credit of 3% (4% for national strategic technologies) was also applicable, with the total additional credit capped at twice the basic credit amount.

The R&D Tax Incentive aims to boost competitiveness and productivity across the Australian economy by:

• Encouraging industry to conduct R&D that may not otherwise have been undertaken.
• Providing businesses with more predictable and less complex support.

The program is jointly administered by the Australian Taxation Office (ATO) and the Department of Industry, Science and Resources (DISR). Companies must register their R&D activities with DISR before claiming the tax offset.

For entities with an aggregated turnover of less than $20 million: Eligible for a refundable tax offset equal to the company's tax rate plus an 18.5% premium.

For entities with an aggregated turnover of $20 million or more: Eligible for a non-refundable tax offset calculated as the company's tax rate plus a two-tiered premium based on R&D intensity:

• R&D intensity up to 2%: Tax offset equals the company tax rate plus an 8.5% premium.
• R&D intensity above 2%: Tax offset equals the company tax rate plus a 16.5% premium.
• R&D intensity is defined as the proportion of the company's total expenditure that is dedicated to eligible R&D activities.

To qualify for the R&D Tax Incentive, an entity must be an R&D entity, which includes:

• A company incorporated under Australian law.
• A company incorporated under foreign law but considered an Australian resident for income tax purposes.
• A company incorporated under foreign law that is a resident of a country with which Australia has a double tax agreement and carries on business through a permanent establishment in Australia.
• Conduct at least one core R&D activity as defined under the program.- Incur eligible R&D expenditure of at least $20,000 during the income year.

The Indonesian government provides a Super Tax Deduction for companies engaging in eligible R&D activities. This incentive allows for a gross income reduction of up to 300% of the total costs incurred in conducting R&D. The breakdown of this deduction is as follows:

100% deduction of the actual costs incurred during the R&D activities.

Additional deductions up to 200% of the accumulated costs, contingent upon specific achievements:

• 50% additional deduction if the R&D results in obtaining intellectual property rights, such as patents or Plant Variety Protection (PVP) rights, registered in Indonesia.
• 25% further deduction if these intellectual property rights are also registered internationally.
• 100% additional deduction if the R&D reaches the commercialization stage.
• 25% extra deduction if the R&D is conducted in collaboration with Indonesian government R&D institutions or higher education institutions.

These additional deductions are applied over a period of up to five years from the registration of the intellectual property or the commencement of commercialization. The total additional deduction claimed in a fiscal year is capped at 40% of the taxable income for that year, with any excess amount eligible for carryforward to subsequent years.

To qualify for this Super Tax Deduction, the R&D activities must:

• Be conducted within Indonesia.
• Aim to advance the national economy, develop new industries and technologies, or facilitate the transfer of foreign technology to local businesses.
• Result in the creation of intellectual property or reach the commercialization stage.

Taxpayers intending to avail themselves of this incentive are required to submit an application to the Indonesian tax authorities, providing detailed documentation of the R&D activities and associated expenditures.

In December 2023, Saudi Arabia announced a tax incentive package to encourage multinational corporations to establish their regional headquarters (RHQs) within the country. Key features of this program include:

• Corporate Income Tax Exemption: A 30-year exemption from corporate income tax for RHQ-licensed entities, effective from the date of license issuance.
• Withholding Tax Exemption: A 30-year exemption from withholding taxes on payments related to approved RHQ activities.

These incentives aim to position Saudi Arabia as a central hub for multinational companies' regional operations. As of the announcement, over 200 companies had obtained RHQ licenses under this program.

Saudi Arabia has established several SEZs to promote investment in key sectors. Incentives offered within these zones include:

• Reduced Corporate Income Tax Rate: A 5% corporate income tax rate for up to 20 years.
• Withholding Tax Exemption: Unlimited withholding tax exemption for the repatriation of profits from SEZs to foreign entities.
• Customs Duties Deferral: Deferral of customs duties for goods and equipment within SEZs.
• Value Added Tax (VAT) Exemption: 0% VAT on goods exchanged within and between SEZs.

These incentives are designed to attract foreign direct investment and stimulate economic growth in targeted industries.

While these programs are not exclusively focused on R&D, companies engaged in innovative activities may benefit from the favorable tax environment within RHQs and SEZs. Additionally, Saudi Arabia's Vision 2030 initiative emphasizes the importance of innovation and technological advancement, which may lead to the development of R&D-specific incentives in the future.

Türkiye offers comprehensive tax incentives to promote Research and Development (R&D) and design activities. These incentives are supported by legislation such as the R&D and Design Activities Support Law No. 5746 and the Technology Development Zones Law No. 4691.

R&D Deduction: 100% of eligible R&D expenditures can be deducted from the corporate tax base.

• Income Tax Withholding Incentive: 90% of income tax on salaries of PhD holders and 80% for other R&D personnel is exempt.
• Social Security Premium Support: 50% of employer contributions for R&D and support staff salaries are covered by the government for five years.
• VAT Exemption: Purchases of new machinery and equipment for R&D projects are exempt from VAT.
• Stamp Tax Exemption: Documents related to R&D activities are exempt from stamp tax.

In July 2024, President Recep Tayyip Erdoğan announced a $30 billion incentive package to boost high-tech production, including electric vehicle manufacturing, semiconductor chip production, and battery development.

These incentives aim to strengthen Türkiye’s competitiveness in R&D and innovation.

Spain provides a 40% bonus on Social Security contributions for each professional dedicated to R&D, with a maximum of three years of bonus per research staff. Additional bonuses of 5% are available for contracts to individuals under 30 and women in new indefinite contracts.

These incentives are part of Spain's strategy to foster innovation and enhance competitiveness across various sectors. Companies engaged in R&D and technological innovation activities can significantly benefit from these tax relief measures.

Overview: The WBSO is designed to stimulate innovation by compensating part of the costs and expenses associated with R&D projects. Companies can benefit from a reduction in wage tax and social security contributions for employees engaged in R&D activities.

Benefits for 2025:

• General Rate: 36% of the first €380,000 of R&D costs; 16% for costs exceeding this amount.
• Start-ups: 50% of the first €380,000 of R&D costs.
• Eligible Costs: The WBSO covers both salary and other costs and expenses related to R&D. For self-employed entrepreneurs, a fixed deduction is available.

Overview: The Innovation Box offers a reduced corporate income tax rate for profits derived from self-developed intangible assets, such as patents or software. This regime aims to encourage companies to develop innovative products and services within the Netherlands.

Tax Rate: Qualifying profits are taxed at an effective rate of 9%, significantly lower than the standard corporate tax rate.

These incentives are part of the Netherlands' strategy to foster innovation and enhance competitiveness across various sectors. Companies engaged in R&D activities can significantly benefit from these tax relief measures.

• Standard R&D Credit: Companies can claim a tax credit of up to 15% of qualified R&D expenditures against their corporate income tax payable for the current year. The credit is capped at 30% of the total tax payable for that year and cannot be carried forward.
• Alternative Option: Alternatively, companies may opt for a 10% tax credit on qualified R&D expenditures, which can be applied against the current year's tax payable and carried forward for up to two subsequent years. The same 30% cap applies.

These provisions are effective from January 1, 2016, to December 31, 2029.

In January 2023, Taiwan amended the SII to bolster support for critical sectors, introducing the following incentives effective from January 1, 2023, to December 31, 2029:

• Forward-Looking Innovative R&D Expenditure Credit: Companies can claim a tax credit of up to 25% of expenditures on forward-looking innovative R&D against their corporate income tax payable for the current year.
• Advanced Manufacturing Equipment Credit: A tax credit of up to 5% is available for investments in equipment used in advanced manufacturing processes, applicable against the current year's corporate income tax payable.

To qualify, companies must meet specific criteria, including minimum R&D investment thresholds and strategic importance in global supply chains.

• Deduction for Substantial Investments: Companies investing after-tax profits in assets such as buildings, machinery, equipment, software, or technology for business operations can deduct the investment amount from the tax base, thereby reducing the 5% surtax on undistributed earnings. The total investment must exceed TWD 1 million over a three-year period.
• Tax Credits for Smart Machinery and 5G Systems: From January 1, 2019, to December 31, 2024, companies investing in smart machinery or 5G systems can claim a tax credit of up to 5% of the expenditure against the current year's corporate income tax payable, or 3% of the expenditure, creditable over three years. The credit is capped at 30% of the current year's corporate income tax plus the profit retention tax payable.

These incentives aim to promote industrial innovation, technological advancement, and the development of high-value industries in Taiwan.