Almost two years ago, Croatia abolished tax breaks for research and development.
For almost two years, Croatian companies have been unable to use tax breaks for the cost of research and development activities, because since the beginning of 2015 there has been no regulatory framework. The law which regulated tax breaks for research & development expired at the end of 2015, and the new one has not yet been adopted, reports Večernji List on November 19, 2016.
This means that Croatia has lost two years when it comes to stimulating R&D, a key segment for economic growth, development of entrepreneurship, employment and combating emigration of young people. Companies are trying to be optimistic and patient, which is easier for larger companies since they have accumulated tax incentives from the preceding period.
For smaller companies, tax breaks were a springboard for investment and growth. “Government’s inaction has directly cost us at least four new jobs which we could have opened if we were able to use tax breaks. This would mean that we would have achieved better results”, said Damir Sabol, the founder of Microblink.
In 2015, Pliva invested more than 600 million kuna in research and development, and the total amount for 2015 and 2016 will exceed a billion kuna. “Pliva is one of the leading companies in the region, and such a position is based on the work of experts, innovative technologies and investments in research and development. Experts and scientists in Zagreb work on projects for the most developed pharmaceutical markets, and their knowledge is exported to all continents”, said Pliva in a statement. They hope that the new government will make further efforts to use the full potential of the domestic pharmaceutical industry.
The negative effects of the state administration inaction have been felt by Ericsson Nikola Tesla as well, where R&D activities employ more than a third of all workers. “While Croatia is abolishing subsidies, other EU countries are doing the opposite and allocate much greater funds for R&D. In Croatia, employers which counted on these benefits now have the problem of keeping these jobs and maintaining their competitiveness”, said Gordana Kovačević, the CEO of Ericsson Nikola Tesla.
Education and Science Ministry claims that they will do their best to expedite the matter, but there are no exact deadlines. “There is still no regulatory framework under which companies could get tax breaks for the cost of research and development”, explained the Ministry, adding that the public consultation period for the new law was launched in April. “The state support in the area of tax breaks for research and development is necessary in order to avoid reductions in investments and relocation of production to other countries”, concluded the Ministry.
