Investment in R&D: how to finance and enhance your activity
The application deadline for the SIFIDE II tax incentive program has been extended until July 31, 2020 with the approval of the OE 2020.
According to the latest data available from the National Scientific and Technological Potential Survey (IPCTN), carried out by the Directorate-General for Education and Science Statistics, investment in research in development (R&D) in Portugal corresponded, in 2018, to 2,769 million euros, a figure that represents about 1.36% of national GDP, reflecting a clear investment by companies in this area.
The current scenario is marked by growing uncertainty, in particular by small and medium-sized companies that are in a more delicate position resulting from the effects of this Pandemic, seeking, consequently, ways to promote, promote and finance what their activity is.
In this context, the entities that are mainly intended for the pursuit of R&D activities, whether for their own benefit, in the development of new and / or substantially improved products and / or services, or through the hiring of specialized third parties, hold a process which can enhance its strategy: the recognition of credibility in the field of R&D.
This statute stems from that established under the System of Tax Incentives in Business Research and Development (SIFIDE II), regulated by the Investment Tax Code (CFI).
What is SIFIDE?
SIFIDE is a tax incentive that aims to increase the competitiveness of companies, supporting the reinforcement in Research & Development by deducting from the collection of the IRC a percentage of the respective R&D expenses.
There are several advantages associated with this mechanism, of which we highlight the following:
• The fees of the recognized entity, related to projects involving R&D activities in the recognized scientific (s) or technological (s) domain (s), may be eligible within the scope of applications to SIFIDE II to be submitted by your customers. It should be noted that SIFIDE II consists of a tax benefit, by deducting IRC collection from 32.5% to 82.5% of the expense incurred during the year, in accordance with the rules imposed by law, so, from the customers’ perspective suitable entities, may thus result in an additional incentive to hire such specialized services with high added value.
Notwithstanding the foregoing, it is important to retain at the outset that entities that obtain the said recognition of good repute cannot deduct, for the purposes of SIFIDE II, any type of expenses incurred in projects carried out on behalf of third parties;
• Contributions by companies to investment funds, public or private, intended to finance companies recognized for their R&D status are also eligible expenses under SIFIDE II, so, from the perspective of recognized entities.
This fact may give rise to an alternative source of relevant funding, with several existing venture capital fund managers with instruments created in accordance with the regime in question;
• The focus on the development of R&D activities corresponds, more and more, to a distinctive factor and that enhances the creation of value, so that the achievement of said recognition may constitute a relevant asset with current or potential partners due to the evidence of their competences in the area in question.
The recognition of suitability is obtained and requested from the National Innovation Agency (ANI) by submitting a request on the website of the said entity, including the presentation of a set of elements, namely statements that prove the organization’s R&D nature, produced by entities of the National Scientific and Technological System (SCTN) that operate in the company’s areas of scientific and technological competence.
After the approval of this recognition, it will be valid until the eighth year after the request, and after this period, it is necessary to carry out a reassessment in order to verify the maintenance of the assumptions that determined it. Also at this level, the list of entities recognized in this matter is available on the ANI website.
It should be noted that the duration of SIFIDE II was extended until July 31, 2020, thus giving added security to entities that choose to pursue the strategy of recognition as a strategy for valuing their activity.
Finally, anyone who has invested in R&D in 2019, namely by contracting services from qualified entities in R&D, may submit an application to SIFIDE II, which, for entities with the fiscal year coinciding with the calendar year, must be submitted until next July 31st.