Higher tax deductions for R&D
The Norwegian Government has raised the basis for tax deductions on in-house research and development under the SkatteFUNN Tax Incentive Scheme from NOK 5.5 million to NOK 8 million. In addition, the combined maximum ceiling for costs for in-house and procured R&D has been doubled to NOK 22 million.
The changes, which enter into effect from the 2014 tax year, vastly improve the financial conditions for companies that carry out research and development. In addition to the higher tax-deduction basis, the maximum hourly rate for the use of the company's own R&D personnel has been raised from NOK 530 to NOK 600.
"We hope that the expansion of the SkatteFUNN scheme will lead to even more R&D activity in trade and industry in 2014," states Sander J. Tufte, Director of the Department for the SkatteFUNN Tax Deduction Scheme at the Research Council of Norway. The SkatteFUNN scheme is administered jointly by the Research Council and Innovation Norway.
Significant growth ' even greater potential
In 2013, approximately 4000 active projects were registered under the SkatteFUNN scheme. The amount of budgeted tax deductions last year totalled over NOK 2 billion, and over 2000 new projects were approved under the scheme in the course of the year. Compared with 2012, this represents an increase of over 20 per cent in the number of new projects. Over 30 per cent of new projects approved in 2013 are led by companies that had not previously applied for a tax deduction.
"These are encouraging figures," says Mr Tufte. "However, there are still companies in Norway that are unaware that they are eligible to apply for a tax deduction for R&D-related costs. We intend to do something about that."
Many companies do not know that they may qualify for a tax deduction for activities aimed at improving products and services already on the market. Similarly, many companies are not aware that they may be eligible for a deduction for activities designed to find new ways of applying existing knowledge, provided that these efforts generate new knowledge.
SkatteFUNN enhances expertise and builds good relationships
Recent figures from the Research Council show that companies develop a high level of expertise as a result of the innovation projects they carry out.
For many companies, projects approved under the SkatteFUNN scheme provide an arena for honing their skills, which in turn inspires them to pursue further research and development activity and accomplish more. Through the projects, companies establish ties to networks, enhance their expertise and gain valuable experience that they can draw upon in future projects.
Ninety per cent of the enterprises behind the approximately 2 000 projects approved under the SkatteFUNN scheme in 2013 have stated that they plan to cooperate with other actors to develop new or improved products and services or smarter production methods. Companies cooperate primarily with suppliers, customers and other users of their products or services. However, national and international specialist groups and research institutions are also key collaborative partners for Norwegian companies.
"This reinforces what we have observed previously: innovation is often the outcome of collaboration between different groups and collective learning," says Mr Tufte.
The SkatteFUNN scheme promotes early concept testing
Experience has shown that companies have a great need to test out their ideas at an early stage. The tax relief provided by the SkatteFUNN scheme makes it easier for companies to launch development activities and achieve more rapid and higher quality results.
"We also see that the scheme plays an important role in reducing the level of risk associated with innovation activities," Mr Tufte adds.
The SkatteFUNN scheme is often a company's first step in expanding its research and development activity and serves as a springboard for seeking support under other funding schemes at the Research Council. This in turn leads to more innovation in Norwegian trade and industry.
About the SkatteFUNN scheme
- The SkatteFUNN scheme was launched in 2002. Under the scheme, all business enterprises subject to taxation in Norway are eligible for tax deductions of up to 20 per cent of the costs related to research and development activities.
- Both industrial research and experimental development projects are qualified for participation under the SkatteFUNN scheme.
- An impressive 80 per cent of the projects approved under the scheme are development projects.
- The common denominator for all projects approved under the scheme is that they seek to develop new or improved products, services or production methods. Projects must be designed to generate new knowledge needed to develop new or improved products, services or production methods.
- At present, a total of 23974 projects have been approved for a tax deduction under the SkatteFUNN scheme. (Source: the SkatteFUNN Tax Deduction scheme database, 29 January 2014)
