The amendment to Section 34c of the Income Tax Act, effective from 1 January 2024, brings a key change in the application of the research and development deduction. The amended law adds an additional provision that provides the authority to prove the contents of the project documentation by means of additional evidence in the event that doubts arise on the part of the tax administrator. This measure can be applied to tax proceedings initiated since the effective date of the amendment.

The essentials of the project documentation for claiming the deduction for research and development support are mainly the project objectives achievable and evaluable after completion, the duration of the project, the expected expenditure in each year of the project, the names of the persons professionally providing the project with qualifications and employment relationship, and the method of control and evaluation of the progress of the project. In addition to the administrative complexity, the previous situation entailed a considerable risk of application. In the case of tax audits, the tax administrator often disputed the sufficiency of detail in the preparation of the above-mentioned project documentation essentials. This has been associated with a decline in the number of taxpayers using the R&D deduction, to which the new legislation responds.

The amendment to the Act fundamentally changes the approach to proving the content essentials of project documentation. If the tax administrator considers them insufficiently specific, it is now possible to prove these requirements using other means of evidence. It is important to note, however, that the new legislation does not reduce the demands regarding the formal aspect of projects. Its purpose is not to supplement the mandatory elements of the project documentation, but only to specify or demonstrate them in greater detail. Even after the amendment, project documentation that does not meet the statutory requirements will still result in the exclusion of the deduction from the tax base. The new provision thus provides taxpayers with the opportunity to submit more detailed information and evidence during tax audits or other tax proceedings. The amendment could therefore provide more incentive to taxpayers who are entitled to the deduction for research and development but have not used it so far for various reasons.

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