2026-07-23
- The income tax relief measures introduced for the period 2022–2024 to encourage innovative activity cost the state budget an average of EUR 179 million per year.
- Fewer than half (41 percent) of the companies that received direct innovation support also took advantage of the tax relief for research and experimental development (R&D).
- Over a three-year period, the total number of companies making use of the relief fell by 5 percent.
- The National Audit Office recommends simplifying the process for claiming the relief and reducing the administrative burden, particularly for small businesses.
The state encourages business innovation not only through direct funding but also through tax incentives. However, the National Audit Office’s audit revealed that one of the most important tax relief schemes designed to promote innovation is not reaching a significant proportion of innovative businesses. Less than half (41 percent) of companies that received direct innovation support make use of the R&D tax relief.
“The R&D tax relief is currently failing to deliver its intended value because the state itself is erecting bureaucratic barriers in its path. When more than half of companies opt out of the relief solely because of the administrative burden and the requirement to duplicate data that the authorities already hold in their registers, we are failing to realise the enormous potential for the use of state resources. Tax incentives must encourage an innovative breakthrough, rather than imposing on businesses functions that a digitalised state can perform itself,” says Auditor General Irena Segalovičienė.
Only a part of innovative businesses take advantage of tax relief
Although the state promotes innovation through both direct funding and tax relief, not all companies take advantage of these opportunities. Of the 301 companies that received direct state support for innovation, only 122 (i.e. 41 percent) additionally took advantage of the R&D tax relief. Furthermore, the total number of companies taking advantage of the relief fell from 2,869 to 2,714 over a three-year period.
Why are businesses not making use of the relief?
The audit found that the main obstacles are complex administration, extensive documentation requirements and uncertainty regarding the evaluation of R&D activities.
The companies surveyed most frequently stated that the incentive was not relevant to them due to a lack of profit in the early years of operation (24 percent), a lack of expertise to properly document R&D activities (17 percent), the administrative process being too complex and time-consuming (16 percent), while some companies fear that the declared expenditure will not subsequently be recognised as R&D activity.
It has been found that the system still involves excessive procedures. In order to benefit from tax incentives or funding for the development and implementation of innovations, companies are required to submit documents that government bodies already hold in their records. For example, applicants are asked to resubmit annual income tax returns or R&D expenditure reports to the Innovation Agency and the Central Project Management Agency, even though these documents have already been submitted to the State Tax Inspectorate or the State Data Agency.
The audit also revealed that the administrative burden places a particularly heavy strain on small and micro-enterprises. Although almost half of the enterprises benefiting from R&D tax relief are micro-enterprises, they are subject to the same documentation requirements as large enterprises.
What the National Audit Office proposes
The National Audit Office recommends simplifying access to the R&D tax relief and reducing the administrative burden on businesses. It is proposed to introduce a model of standardised rates, to develop solutions for the exchange of information between the State Tax Inspectorate, the State Data Agency and the administering authorities regarding the use of R&D expenditure data, to clarify the descriptions of project funding conditions, and to ensure that applicants do not have to repeatedly submit data already held by state institutions. It is also recommended to extend the application of tax incentives for innovation, which would encourage the creation, protection and commercialisation of intellectual property, and to review excessive administrative requirements.
It is expected that, once these recommendations are implemented, a significantly larger proportion of companies that have received direct state support for innovation will benefit from the R&D tax relief – the aim is to increase this proportion from 41 percent to 80 percent.
State incentives must not only be financially attractive but also easily accessible. The lower the administrative burden on businesses, the greater the likelihood that tax relief will encourage investment in innovation and generate a higher return for the state.