Commission moves to create common system for R&D tax credits

Commissioner László Kovács: "Helping make Europe more competitive."

Now the European Commission is stepping in, endorsing the use of tax incentives to stimulate investment on R&D, and calling for a single standardised approach across member states.

Calling for a consistent tax environment Commissioner László Kovács said in a statement, "I am convinced that tax incentives promoting R&D would make Europe more competitive and help create more jobs and growth when coordinated among the Member States."

Science and Research Commissioner Janez Potočnik agreed: "We want to break down the barriers that prevent companies and researchers working together across internal borders and so create a European research area. A common approach to tax incentives would be a good step in the right direction."

In parallel with the growth in R&D tax incentives, industry is embracing a more collaborative approach and cooperation across borders is becoming commonplace. But the diversity of schemes has created a complex landscape for R&D tax treatment.

The Commission said that tax incentives that are restricted to research carried out in the country giving the relief are incompatible with the EC Treaty, and any tax breaks targeted at a specific group or sector, may be construed as state aid.

Member states should work together when deciding the tax treatment of large-scale transnational R&D projects, the growth of young innovative enterprises, the cross-border mobility of researchers and philanthropic funding of research.

Among measures to promote private sector R&D, tax incentives have the advantages of being timely, predictable and transparent. They entice more companies to invest in R&D and can create lasting behavioural changes to the way they plan and take part in R&D activities.

To date 15 EU members have implemented R&D tax incentives.