Government to Increase Research and Development Tax Breaks

Total Croatia News

Entrepreneurs praise the move.

The Spin Valis company from Požega, one of the Croatian leaders in furniture production, has invested between 1.6 and 2 million kuna a year in research and development. Every year, they spend between 1 and 1.5 percent of their revenues in new products and designs. But, this year, the research and development allocation should substantially increase. The reason is the new Law on State Aid for Research and Development Projects, which the government adopted yesterday and sent to the Parliament, reports Jutarnji List on January 12, 2018.

In the MPs support the law, which is in line with EU regulations, entrepreneurs will be able to reduce the tax base for the payment of corporate taxes, and the total amount of aid could reach up to 300,000 euros. Also, they will be able to use other R&D grants.

The government’s objective, according to Deputy Prime Minister and Economy Minister Martina Dalić, is to stimulate private sector’s investments in research and development and make Croatia spend up to 1.4 percent of GDP for these purpose by the end of the decade. According to the latest available data, which are those for 2015, the R&D allocations in Croatia amounted to just 0.85 percent of GDP, which placed Croatia almost at the bottom of the European Union. “Once the law is adopted, we will certainly invest more than we do now. Moreover, I believe we will make the most of it. We already have projects that we will offer,” said Zdravko Jelčić, the CEO of Spin Valis.

“The European Union improves its competitiveness by stimulating investments in research and development, and Croatia has no other option. We cannot create our competitiveness on volume production, which is a recipe applicable to the Far East, but on investments in design and new products. This is the best way to boost competitiveness,” Jelčić added.

Lipik Glas, the Croatian manufacturer of parts for the global auto industry, also welcomed the new law and said they had already prepared projects that they intend to submit for state support. So far, the spent around 15,000 euros on research and development, according to Danijel Zadjelović, the CEO of Lipik Glas. The money has been directed to new projects and new technologies. “Every incentive for the private sector to invest more in research and development is welcome. We already have projects that we will nominate,” noted Zadjelović.

The new law is appealing to the IT sector as well. Ericsson Nikola Tesla said that it was very positive that the government had initiated a procedure to bring back provisions for stimulating R&D activities after a three-year pause, which should make Croatian companies again equal to those in neighbouring countries.

“Investing in research and development for Ericsson Nikola Tesla, as well as for all other technology companies, is strategically important, but also risky. With the new tax breaks, this will be reduced, and the competitiveness will increase. Part of the money invested in the development and research activities through the tax relief will be focused on new projects and creating employment,” said Darko Huljenić, director of the Ericsson Nikola Tesla research centre.

“Activities aimed at encouraging investment in R&D in Croatia are welcome since we are lagging behind other countries,” agreed Vedran Antoljak, the chief partner at Sense Consulting.

Translated from Jutarnji List.


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