R&D Tax Incentives

In a practical world, innovation is about taxation. All the talks of modernisation mean nothing until they are supported by financial incentives.

Russian tax law gives generous, yet somewhat ambiguous, relief for the R&D expenditures: companies may reduce their tax bills by the amount of their science or technology costs and in some areas the government even adds an extra 50 cents tax reduction for each dollar spent. So, a company can cut its income tax by more than it actually spent.

The law recently adopted by the State Duma and signed by the Council of the Federation on May 25 seeks to make the inducement broader, clearer and juicier. It seems that now not only expenses of developing new products or services are deductible, but advancement of existing technology or even management techniques can be taken from taxable income.

Taxpayers will be able to create reserves for future R&D costs. Money spent on intellectual property rights can be deducted from taxable income as expenditure or through depreciation of intangible asset – as the taxpayer chooses.