The combined deduction based on research and development costs

The translation into English contains instructions and advice but lacks legal force. In case of divergence of interpretation, the versions in the two official languages Finnish and Swedish will prevail.

This guide describes the general additional tax deduction for research and development, and the extra additional deduction for research and development, which together are also referred to as the combined deduction.

For in-depth guidance on the temporary additional tax deduction for research and development expenses, which is based on working together with a research and information-dissemination organisation (also referred to as the “additional deduction for R&D co-operation”, see Additional deduction for research and development in tax years 2021–2027.

1 Introduction 

The Act on additional deductions based on expenses of R&D activities (Laki tutkimus- ja kehittämistoiminnan menoihin perustuvista lisävähennyksistä verotuksessa (1298/2022) (the abbreviation used below in this guide: “the Act”)) contains provisions governing the combined deduction. The Act is in force since 1 January 2023. The Act is based on Finnish parliament’s bill number code LA 69/2022 vp and the Finance Committee report number VaVM 35/2022 vp related to that.

All taxpayers that operate business or agriculture are entitled to claim the additional deductions. The deductions are made on the basis of R&D-related expenses for wages and purchased services as referred to in the Act.

The “combined” deduction is composed of two components: The deduction’s first part is the ‘general additional deduction’ (yleinen lisävähennys) amounting to 50 percent of the taxpayer-paid expenses that qualify for the combined deduction. The general additional deduction’s minimum threshold is €5,000 in the tax year, and the maximum is €500,000. For every tax year, the thresholds start from zero. The general deduction can be claimed for the first time in tax year 2023. The deduction’s second part is the ‘extra additional deduction’ (ylimääräinen lisävähennys), based on a year-on-year growth of the taxpayer’s R&D expenses. The extra additional deduction amounts to 45 percent of the difference between previous year’s all taxpayer-paid expenses that qualify for the combined deduction, and the current year’s all taxpayer-paid expenses that qualify for the combined deduction. The extra deduction has no minimum amount. However, for one tax year, the maximum amount is €500,000. This deduction can be claimed for the first time in tax year 2024. This guide contains instructions concerning both deductions, referring to them collectively as the ‘combined’ deduction, and sometimes in the plural, as ‘additional deductions’.

In addition to the combined deduction discussed in this guide, another similar deduction is in effect in Finland, namely the additional deduction based on co-operating with a research and dissemination organisation (often called ‘additional deduction for R&D co-operation’). The scopes of application of the two deductions overlap one another in part. However, the tax rules for each one contain important differences concerning the deductible amounts and the deductions’ base. Accordingly, the deduction for R&D co-operation can only be claimed when services relating to R&D were bought from a research and dissemination organisation, but the combined deduction – discussed in this guide – is claimed when the taxpayer has paid out wage costs and external service expenses when conducting research and development. Although the two deductions may overlap, the deduction based on co-operating with a research and dissemination organisation is greater (150% of qualifying expenses) than the combined deduction (50% of qualifying expenses). It may additionally be noted that the combined deduction contains an added element based on growth of expenses, which the deduction for R&D co-operation does not have. No combined deduction can simultaneously be claimed when the taxpayer claims the deduction related to R&D co-operation based on one set of expenses. From the perspective of European law, neither one of the two deductions can be viewed as comparable with state subsidies.

For more information on the deduction based on R&D co-operation, see Additional deduction for research and development in tax years 2021–2027. 

2 Taxpayers eligible to the combined deduction 

According to § 1, subsection 2 of the Act, taxpayers carrying out research and development related to the taxpayer’s business or agricultural activity are entitled to the additional deductions. In addition, nonresident taxpayers that conduct an R&D activity from a permanent establishment situated in Finland are also entitled to the additional deductions.

Under § 1, subsection 2 of the Act, if the conditions for the combined deduction are fulfilled, any taxpayer operating in business or agriculture, regardless of company size and regardless of its business sector, can claim the deduction. This means that all Finnish companies such as partnerships, limited partnerships, and corporate entities that conduct business or agricultural operations are entitled to the combined deduction. In accordance with the provisions of § 3 of the Act on income tax (TVL), limited-liability companies (Oy; Ab), cooperative societies (osuuskunta; andelslag), associations, and foundations are examples of “corporate entities”. Operators of a trade or business, and operators of agriculture, that are self-employed and Finnish tax residents are also entitled to the combined deduction. Moreover, a foreign corporate entity that operates in business or agriculture, which due to its place of effective management is tax resident of Finland, i.e., having general liability to tax, is entitled to the combined deduction.

Under § 1, subsection 2 of the Act, if a nonresident taxpayer has a permanent establishment in Finland, the taxpayer is entitled to the combined deduction. In that case, it is required that the relevant R&D activity is conducted from the permanent establishment. For more information on permanent establishments, see Income taxation of foreign corporate entities - Business income and other categories of income sourced to Finland.

The combined deduction is only available to taxpayers operating in business or agriculture. ‘Operating in business’, according to § 1, subsection 1 of the Act on taxation of business income (EVL), refers to a natural or legal person that operates a business enterprise or operates a trade. The EVL contains no further definition of activities deemed ‘business’. The established case-law concerning the matter equates ‘business’ with various activities aimed at generating profits, having some risks inherent, having a high degree of independence, extensiveness, continuity; and being directed towards an unrestricted number of people. All of these criteria need to be satisfied for an activity to be deemed ‘business’. ‘Operating in agriculture’, according to § 2, subsection 1 of the Act on taxation of agricultural income (MVL), refers to farming and special subcategories of farming or closely related activities of forestry that have a connection to agriculture but are not deemed as an operation separate from the main agricultural activity.

3 Requirements for the combined deduction 

One of the conditions for the additional deductions, i.e. both the general and the extra additional deduction, is that the taxpayer conducts a research and development activity with a direct connection to the taxpayer’s business or agriculture.

3.1 The R&D activities 

3.1.1 The Act’s definition and sources of interpretation 

According to § 2, subsection 1 of the Act, research and development means a creative and systematic activity that aims to add to knowledge, or seek to use knowledge for the purpose of finding new applications, where the objective is to attain something substantially new.

This means that § 2, subsection 1 of the Act contains the legal markers of R&D activities. Because of the wide variety of research and development that can be pursued, it is not feasible to arrive at a definition of R&D activities that would be full and complete. For this reason, the Act’s travaux préparatoires indicate that the concept of research and development should be subjected to a broad interpretation. However, the legal markers under the provisions of § 2, subsection 1 of the Act should be borne in mind. In other words, it is expected of R&D activities that they be creative, systematic, and pointed towards the attainment of something substantially new. For example, the Act’s definition of R&D activities is not fulfilled if the taxpayer merely engages in improvements to the taxpayer’s operation of business or trade, in making the operation more efficient, or in developing the operation in a general manner.

The definition laid down in the Act is the same as the definition that Statistics Finland uses. When the question whether an R&D activity fulfils the Act’s requirements is being evaluated, it is appropriate to use the explanatory notes that Statistics Finland has released concerning the definitions used. The materials that Statistics Finland has released contains the following descriptions on the subject of characteristics of an activity defined as research and development:

1. Looking for new information: the objective of R&D activities is to generate new information, knowledge and results. The mere application of existing information to develop new solutions, products, processes or procedures is not an R&D activity.
2. Creative: research and development activities are characterised by creativity, problem setting, testing of new concepts and hypotheses. Routine remake, review or development of products, processes, practices or models is not R&D.
3. Uncertain success: research and development activities are characterised by uncertainty both in terms of the results achieved and the resources required.
4. Systematic: research and development activities are carried out on a planned basis and their implementation is monitored. The purpose of the action is defined; and the R&D activity is allocated a set of resources, which is based on a predetermined policy. The R&D activities in a business enterprise are typically organised as a project, but R&D can also be a goal-oriented activity carried out by one person or group.
5. For transferable and/or replicable results: the data and results derived from R&D activities are replicable and transferable.

The definition of R&D according to Statistics Finland is largely the same as the characterisations of research and development activities in the OECD Frascati Manual. This means that the characterisations of the Frascati Manual can also be used to assist in assessing the nature of the activity. Definitions related to research and development are posted on the website of Statistics Finland. The Frascati Manual is available on the website of the OECD.

In addition to focusing on the R&D activities’ characteristics, definitions of R&D variations can also be based on specific types or categories of research. The definitions of Statistics Finland and the Frascati Manual refer to basic/fundamental research, applied research, and experimental development. Research activities need not be strictly within a particular category of research in order to be an R&D activity within the meaning of the Act. However, according to the Government Proposal, the definitions of the Frascati Manual and Statistics Finland may be a useful interpretative tool for assessing whether the activities constitute R&D within the meaning of the Act.

For more details concerning the definitions, see the Frascati Manual and other sources. According to the definitions, fundamental research is characterised by the pursuit of new data without a direct practical application. This category of research typically focuses on an analysis of characteristics, structures, and causal relationships with the aim of creating, verifying and explaining new hypotheses, new theories, and more. In contrast, applied research aims for a practical application using new data. For example, applied research may have an objective to find applications for the results of recently conducted fundamental research, or it may have an objective to create new methods and means to address a particular problem, for example. Experimental development refers to the use of knowledge derived from research and/or from practical experience in order to create new products and processes or to substantially improve existing ones.

As outlined in the Government Proposal, the definitions of the categories of R&D in the EU Block Exemption Regulation can also be used as an interpretative aid for assessing whether a taxpayer’s research and development activity is satisfactorily deemed ‘research and development’ within the meaning of the Act. However, the Finnish definition found in the Act is not based on the EU Block Exemption Regulation’s definition. The types of research covered by the Block Exemption Regulation (often called the BER) are basic research, industrial research, experimental development and feasibility studies. The definitions in the BER are different from those of Statistics Finland and the Frascati Manual — for example, instead of the term ‘applied research’, the BER refers to ‘industrial’ research. In addition, unlike those of Statistics Finland and the Frascati Manual, the definitions in the Block Exemption Regulation also include the definition of ‘feasibility study’. According to the Block Exemption Regulation, a feasibility study refers to the assessment and analysis of the potential of a project, with the aim of supporting the decision-making process by objectively and rationally highlighting the strengths and weaknesses, opportunities and threats of the project, as well as identifying the resources needed to implement it and the prospects for its success.

3.1.2 Evaluating the legal markers of R&D activities 

The Act’s provisions indicate that R&D activities must have the objective to achieve goals that are substantially new. Not only the development of a completely new product, service or process, but also a substantial improvement of an existing product, service or process, may be regarded as a new achievement within the meaning of the Act. Development work aiming to achieve new goals may include research or exploitation of the results of research. Development work based on an existing product or process may be considered to be directed to something substantially new when the goods, services or processes are to be transformed into a substantial improvement or into a different kind of goods, services or processes. The change may concern the quality, characteristics or intended use of a product or service.

A substantial change in the process may concern the design, manufacturing or delivery process. Also with regard to the development of the process, it is essential that this is not a routine development, but the objective of development must be to create something substantially new. However, R&D activities within the meaning of the Act do not include, for example, the development of an organisation or organisational structure, nor the improvement of the skills of the organisation’s employees.

Whether there is a pursuit of something new within the meaning of the Act, is primarily evaluated from the taxpayer’s perspective. Accordingly, a substantially new result can also be attributed to activities aimed at developing something that is simultaneously being developed by others or, for example, by another company. The key point is that the taxpayer’s objective is to develop and achieve something new, i.e. the taxpayer is thus genuinely engaged in research and development. The taxpayer’s objective should not be just to introduce an existing and well-known innovation, technology or system. By and large, to merely introduce an existing technology or system does not constitute an R&D activity, even if the taxpayer’s system – a software system or the like – were to be customised or modified as a result of the activity. In addition, it is not deemed an R&D activity if the only objective is to seek existing solutions for the taxpayer’s activities, even if such an objective is to change or improve the activities concerned.

In the services sector, R&D activities can take many different forms. In addition to development of new services, research and development in the services sector may include the development of new research methods and metrics, and various electronic services, or the identification of unknown business risks, and more. The R&D related to business process improvements may simultaneously relate to the development of a new product or service concept. In the services sector, R&D activities can often also be associated with the development of a new technical component, system or similar in order to enhance or improve service activities.

By and large, R&D activities need to be kept apart from supporting activities, from activities taking place in the immediate vicinity, and from the company’s general operation. For example, to make improvements routinely to products, services or business processes is not an R&D activity. In the same way, to perform general administrative work, sales work, and marketing-related work is not an activity that matches the definition of R&D.

To conduct research means to have an objective to attain new knowledge previously unavailable. However, the goal to attain new information or knowledge does not necessarily prevent starting a research program as a continuation of a previous one. An important characteristic of R&D activities is the use of systematic work efforts as a method for attaining new information and knowledge.

The Act requires that the taxpayer’s R&D activities are creative. However, for   the Act’s provisions to be applicable and for the taxpayer to claim additional deductions it is not required that new items of intangible property are created in connection with the R&D activities. In other words, to claim the additional deduction does not require examination of the results of the R&D activities or of their overall success. Instead, the taxpayer is entitled to claim the deduction merely by virtue of having conducted an R&D activity. For example, there is no need to always obtain an R&D activity result that could be utilised immediately. Instead, a fundamental or basic research activity is sufficient to meet the Act’s requirements.

The Act requires that the taxpayer’s R&D activities are systematic. This means that the activities must have a predefined objective, and that the taxpayer needs to have made a number of commitments beforehand to safeguard that the R&D has enough resources so it can be advanced according to a predefined plan. There also has to be a framework for follow-up and control. The R&D activities of a business enterprise are often organised in the form of a project. Nevertheless, it is not a precondition for claiming the combined deduction that the company’s research and development be organised in the form of a project. Instead, the existence of a project is seen as evidence of the taxpayer’s systematic approach with regard to research and development. Other evidence of a systematic R&D approach may include existence of structured planning, reporting, work descriptions, budgets and documentation concerning the financing of the R&D.

3.2 The requirement of the R&D to be connected to the taxpayer’s business or agriculture 

According to § 1, subsection 2 of the Act, taxpayers carrying out research and development related to the taxpayer’s business or agricultural activity are entitled to the additional deduction.  This means that the taxpayer must engage in business activities within the meaning of § 1, subsection of the EVL; or engage in agriculture within the meaning of § 2, subsection 1 of the MVL, and that the taxpayer’s research and development must also be related to that activity. Research and development relates to business or agriculture where the purpose of the activity is to add or use data for the purposes of business or agriculture, or to find new applications in business or agriculture, etc. The R&D activities may relate either to the taxpayer’s existing business or agriculture – or to a planned business or agriculture.

The taxpayer can also engage in other activities, outside of business or agriculture. Under the provisions of § 1, subsection 2 of the EVL, when carried out by limited-liability companies and certain other entities, even activities remaining outside of business or agriculture will always be deemed as being part of the business source of income, and the profits or losses of such activities are calculated in accordance with the EVL. No combined deduction may be claimed on the basis of R&D activities serving purposes other than business or agriculture, even if the profits/losses are under the provisions of § 1, subsection 2 of the EVL calculated in accordance with the EVL. The drawing of line between business and nonbusiness operations in the context of corporate taxes is discussed in more detail in the Tax Administration’s instructions concerning “Elimination of the income-source division of certain entities” — Eräiden yhteisöjen tulolähdejaon poistaminen.

For example, self-employed businesses’ and professionals’ income, the income of partnerships, limited partnerships and partially exempt entities, activities that do not qualify as business or agriculture are part of a personal source of income, the profits/losses of which are calculated in accordance with the Act on income tax (Tuloverolaki (TVL)). Because the research and development must be related to business or agriculture, no combined deduction can be claimed in the context of an economic activity belonging to the personal source of income.

Because the R&D must be linked to the taxpayers’ own business activity or agriculture, any R&D carried out for another company to use cannot give rise to the deduction. If carried out for another company, the R&D cannot be a research or development activity carried out by the taxpayer in connection with the taxpayer’s own business or agricultural activity. The combined deduction of the costs of purchased services can therefore be claimed only for the tax purposes of the party whose business activity or agriculture is related to research and development being pursued. In practical terms, the taxpayer purchasing the service is the one entitled to the combined deduction.

If just one company among the subsidiaries belonging to a group enterprise conducts R&D activities for the group in a centralised manner, this company is treated in the same way as an unassociated service provider company in the field of R&D. From this, it follows that the only subsidiary that can claim the combined deduction is the one whose business or agriculture the R&D activities being pursued have a connection with. In these circumstances, if the service-provider subsidiary sells an R&D-related service to another subsidiary, the expense consisting of the purchased service is an acceptable base for the combined deduction for the latter company provided that the other requirements listed in the Act are fulfilled. 

4 Costs qualifying for the combined deduction’s base 

The base for additional deductions consists of taxpayer-paid wages for research and development work performed by the taxpayer’s employees, and of the prices of related services that the taxpayer has bought. Whereas the above costs form the base for the general additional deduction, the extra additional deduction’s base is the increase in costs, in case the costs have grown. The base for the combined deduction is constituted by the accrued cost amounts that the taxpayer became liable to settle during the tax year. However, in the case of agricultural taxpayers and others that use cash basis, the base for the combined deduction is constituted by the paid expenses, i.e. those the taxpayer paid over the course of the tax year.

4.1 Wages 

Under § 2, subsection 2 of the Act, “wages” means taxpayer-paid wages for research and development work performed by the taxpayer’s employees, which are directly paid by reference to the R&D work, and match the definition in § 13 of the Act on tax prepayment (Ennakkoperintälaki (1118/1996)) or the definition in § 1 of the Act governing the remuneration of key employees (Laki ulkomailta tulevan palkansaajan lähdeverosta, Avainhenkilölaki (1551/1995). The Act excludes the employer-provided benefits outlined in § 66, § 66a, § 67, and § 68 of the Act on income tax (Tuloverolaki (1535/1992)) from “wages”.

Accordingly, the combined deduction’s base consists of wage amounts as laid down by § 13 of the Act on tax prepayment,but excluding the benefits in the form of share issues, employee stock options, employer-financed loans with low interest and employer-paid insurance as outlined in § 66, § 66a, § 67, and § 68 of the Act on income tax. Further, the base can also include wage payments subjected to taxes under the Act on the taxation of nonresidents’ income (Laki rajoitetusti verovelvollisen tulon verottamisesta (627/1978)) because this Act’s section 4 provides that ‘wages’ referred to in its provisions are deemed as being the same as the wage amounts laid down by § 13 of the Act on tax prepayment. On the other hand, none of the miscellaneous special payments to employees, such as reimbursement for sojourn and for other work-related costs, although they are listed in § 4 of the Act on the taxation of nonresidents’ income, qualify for additional deductions.

The combined deduction’s base includes paid wages subjected to taxes under the Act governing the remuneration of key employees. Under § 1 of the Act governing the remuneration of key employees, its provisions apply to income that under the TVL (the Act on income tax), is income sourced to Finland. For more information on the definition of ‘wages’ laid down by § 13 of the Act on tax prepayment, see “Tax treatment of wages and trade income” — Palkka ja työkorvaus verotuksessa.

What is understood as ‘wages’ is only the direct employer-paid compensation to the employee, i.e. wages within the meaning of § 13 of the Act on tax prepayment, and of § 1 of the Act governing the remuneration of key employees. This means that the combined deduction’s base cannot contain social security contributions or similar employer-paid additional amounts. Wages paid out in the form of fringe benefits are included in the combined deduction’s base; these must be valuated in accordance with their fair market values as provided in § 64, subsection 1 of the TVL (the Act on income tax).

Self-employed individuals operating under a business name (t:mi) and agricultural operators are deemed unable to make wage payments to themselves. From this, it follows that no remuneration amount for their work efforts can acceptably be included in the base of the combined deduction. Under § 3, subsection 2 of the Act, wage costs, deductible in the employer’s books within the meaning of § 8, subsection 1, paragraph 4 of the EVL are included in the base of additional deductions, on the condition that the wage costs have been incurred during the tax year; additionally, the base can also include wage costs deductible within the meaning of § 6, subsection 1, paragraph 1 of the MVL, paid during the tax year. Consequently, non-deductible wages within the meaning of § 16, subsection 1 of the EVL or § 7, subsection 1 of the MVL shall not be taken into account when calculating the base for the additional deductions. Under § 16, subsection 1 of the EVL and § 7, subsection 1 of the MVL wages paid to the spouse of the business operator or agricultural operator, or paid to a child or other family member whose age before the beginning of tax year has not reached 14 years, are non-deductible. 

If someone on the payroll of a Finnish employer company is working in a foreign country, and the wages are taxed primarily in the country where he or she works, but the wage costs are fully recorded in the Finnish company’s books, this is an expense that can be included in the combined deduction’s base in the same way as other wages.

For wages to be included in the deduction´s base as described here, it is required that the related work is directly connected to R&D activities. The employee’s actual work duties determine whether the work on which remuneration is based is ‘directly connected to R&D’. This means that no job titles, characterisations of the employee’s position, etc. are significant in this regard. It is permissible for an employee to work in R&D within any department or unit of the company, i.e. the department’s name or characterisation are not important. In other words, for someone’s work to be ‘directly connected’ to R&D necessitates no setting up of a new department specialized in R&D in the company nor changes to employees’ job titles, etc.

However, wage costs caused by general administrative work are normally outside of the expenses that can acceptably be connected to R&D activities. In the same way, an IT support function, maintenance and upkeep of R&D equipment, or various cleaning services of R&D office spaces are also outside of the expenses that can be acceptable.

In the case of an employee who works with non-R&D tasks some of the time but is also a contributor to the employer’s R&D activities the rest of the time, only the part of the wage that is based R&D activities can be included in the combined deduction’s base and these wage costs can be included in the deduction’s base. In that case, calculations must be performed in order to include the correct wage cost in the base. The company’s claim for the combined deduction in the case of an individual employee does not require that he or she devote a certain percentage of work hours (such as 50% or a comparable percentage) to R&D every month or every year.

Wages directly connected to R&D are the wages paid to an employee, based on the hours worked in tasks of the employer’s R&D activity. To calculate the exact wage costs being part of the combined deduction’s base, it is appropriate to take account of any changes that have taken place in the employees’ wage levels and to also take account of any differences in pay between the employees’ other work duties and their R&D-related duties. Still other wage costs having a direct connection to R&D are vacation pay, which relates to employees’ work hours in an R&D project or activity, and any paid bonuses or part of them, which relate to an employee’s work effort in an R&D context.

It is appropriate to store records or other reliable proof, such as time logs, to keep track of how employees’ hours and wage costs are linked to R&D activities that qualify for the combined deduction. In this context, monitoring their working time and wage allocation is recommended in real time, on a project-by-project basis, because this facilitates the verification of the hours and increases the reliability of documentation.  Although the R&D activities of a business enterprise might not be taking the form of a project, a real-time approach to recordkeeping is recommended in the same way as is customary in project management. This may also involve specific recordkeeping concerning the different parts of the R&D activities. However, statements written afterwards can also be accepted as a sufficient evidence, for example in the case of expenditure incurred prior to the adoption of the Act, which by virtue of accrual-basis accounting would fall within the period of application of the Act. 

4.2 Purchased services 

In accordance with § 2, paragraph 3 of the Act, R&D-related services purchased are those that are provided by external personnel, acquired for the purpose of carrying out research and development relating to the taxpayer’s activities.

The base for the additional deductions therefore includes purchased services in connection with the taxpayer’s research and development activities, where the service purchased is provided by external staff, of a third party in relation to the taxpayer. Examples of purchased services include computer programming services provided by external personnel, consultancy services and other services consisting of design or planning. From this, it follows that the definition may cover a very broad range of expenditure spent on ‘services’, purchased from any outside source, provided that the spending is for a service directly linked to research and development, and that the service is carried out by external staff in circumstances where the taxpayer’s R&D activities fulfil the Act’s requirements. The seller of the service referred to in the Act may be a fully independent entity vis-à-vis the taxpayer, but services that are acceptable from the combined deduction’s perspective may also be purchased from another company or subsidiary belonging to the same group as the company that conducts the R&D activities.

The acceptable purchased services under the combined deduction’s criterion are limited to purchased services provided by external staff. Consequently, expenditure on the purchase of goods, products, materials, premises or similar, used for research and development activities cannot be included in the base of the combined deduction, even if they are used for the taxpayer’s research and development activities and even if the purchase of the goods, products, etc. would take the form of a ‘service’. The rental or lease payments of premises, or payments for the leasing of computers or other equipment, are not payment for a purchased service within the meaning of the Act.

However, the purchased services referred to in the Act may include not only the wage costs of the personnel used to provide the service, but also the other expenses borne by the service provider. Thus, expenditure on the purchased services charged by the service provider can acceptably include not only the wage costs of the staff, but also other items relating to the service provided.  For example, where the provision of a service by external staff requires the use of the seller’s premises, machinery and equipment, or the use of materials and supplies, these costs are an acceptable part of the total invoiced price of the purchased service, qualifying for the combined deduction’s base when the service provider presents an invoice containing those costs and the wage costs of the provider’s staff together. The condition for inclusion of other, non-work-related costs in the base is that the input of the service provider’s employees is an essential part of the service. An example of these circumstances would be a machine – for which costs are invoiced – that cannot be used without a substantial human input.

The mere fact that the company selling R&D services to the taxpayer includes in the pricing the part of its overhead costs, that relate to the R&D service sold to the taxpayer, does not affect the way the purchased services should be evaluated. Accordingly, the services may nevertheless be regarded as services purchased for purposes of R&D within the meaning of the Act, fully includible in the base of the combined deduction.

When conducting research and development, it is permissible for the taxpayer to engage the workforce of leased employees. The expenses related to employee leasing can thus be included in the additional deductions’ base, provided that the leased employees carry out work that serves an R&D activity that fulfils the Act’s requirements.

The party that sells services to the taxpayer may additionally sell other services than those that satisfy the requirements of the Act. An example of the other services is on-the-job training. Both kinds of services may be included in the total amount of the invoice, presented by the provider of the services. If an invoice includes, in addition to those relating to R&D activities, items based on other activities than those referred to by the Act, these items cannot be accepted as part of the combined deduction’s base.  The invoice may therefore constitute the base for the additional deduction in whole or in part, depending on the nature of the invoiced items.

In order for the company to demonstrate that the items included in the service invoice, i.e. the deduction’s base, fulfil the Act’s requirements, it is appropriate for the service provider to specify the expense items of the services invoiced. As regards the taxpayer’s accounting books, it is recommendable to keep track of the cost of purchased services for the various research and development activities on a project-by-project basis or otherwise, so that the nature of the expenditure and its allocation to the research and development activities referred to in the Act can be verified afterwards.

4.3 Costs that can be included in one tax year

In accordance with § 3, subsection 2 of the Act, the general additional deduction’s base can include, to be accounted for within the tax year, the wages referred to in § 8, subsection 1, paragraph 4 of the EVL, and the expenses paid for purchased services contributing to the R&D activities of the taxpayer, and for which the service performance, for which liability arises to settle the invoice, took place during that tax year as provided in § 22, subsection 1 of the EVL.

In accordance with § 3, subsection 3 of the Act, the general additional deduction’s base for an operator of agriculture can include, to be accounted for during the tax year, the wages referred to in § 6, subsection 1, paragraph 1 of the MVL, and the expenses for purchased services contributing to the R&D activities of the agricultural taxpayer, paid during the tax year.

Concerning the extra additional deduction, the Act’s § 3, subsection 4 refers to the costs that form the base of the general additional deduction. From this, it follows that the calculation, for arriving at the extra deduction’s amount relevant for one tax year, must concern similar expenses as are concerned when calculating the general additional deduction.

Under the provisions in § 22, subsection 1 of the Act on the taxation of business income (EVL), expenditure falls within the tax year when the liability to settle it arose, unless provisions elsewhere in the EVL contain other rules. This means that, in the business source of income, periodised expenditure is normally spread out across several periods on an accrual basis. For a taxpayer whose tax assessment is subject to provisions of the EVL, the calculation of the additional deductions for the tax year has to take account of wage costs and purchased-service costs, for which the liability to settle the expense arises during the tax year and which are deductible in accordance with the EVL. When calculating the combined deduction’s base for the tax year, also holiday pay, bonuses, etc. are determined using the accrual basis. However, if the taxpayer is self-employed, maintaining an accounting system on cash basis within the meaning of § 27a of the EVL, the calculation of the additional deductions concerns the costs actually paid during the tax year.

However, in tax accounting, expenses within the agricultural source of income must be periodized on cash basis. Under § 27a of the Act on the taxation of business income (EVL), similar cash-basis periodisation also applies to business income received by self-employed people who use cash basis. When the income of a taxpayer is tax-assessed on cash basis, the year when the wages are paid, or when a purchased service is paid for, is the year the expense is connected to. Accordingly, for taxpayers using cash basis, the tax year when the expense was actually paid is the tax year when it can be included in the deduction’s base.

Under § 25 of the Act on the taxation of business income (EVL), periodisation of R&D expenses is permissible in a manner different from the main rule found in § 22, subsection 1 of the EVL. Under § 25 of the EVL, costs of research that aim for improvements of the taxpayer’s operation of business, excluding acquisition costs of a building, structure or parts thereof for permanent use, are deemed connected to the tax year when the liability to settle them arose. However, at the request of the taxpayer, the expenses may alternatively be deducted in the form of depreciation in the course of two or more tax years. Thus, under § 25 of the EVL, the company has the option to spread the cost across a number of tax years by way of annual depreciation expensing, rather than deducting the whole amount during one tax year.  Because the base for calculating the combined deduction for each tax year takes into account the invoices on an accrual basis, the choice of deduction does not affect the combined deduction’s base. Accordingly, the base for one tax year’s combined deduction also takes account of the expenses that due to the accrual basis are deemed as the tax year’s expenses, which, however, in accordance with § 25 of the EVL are deducted only later.

If the taxpayer’s R&D activities are organised in the form of a project, and the project had started before the Act’s provisions became applicable, it does not prevent the taxpayer from claiming the additional deductions. Correspondingly, if the taxpayer’s R&D activities are collectively organised in some other way than a project, the taxpayer is not prevented from claiming the deductions even if the R&D activities started before the Act’s provisions became applicable. Nevertheless, only the expenses that are connected to the earliest year when the Act’s provisions are applicable, tax year 2023 – either under accrual basis or cash basis, depending on the taxpayer – can acceptably be included in the base of the general additional deduction.

5 Amounts of the taxpayer’s additional deductions 

The general additional deduction is 50% of the R&D-related expenses for wages and purchased services qualifying for the deduction. The minimum deduction is €5,000 in the tax year, and the maximum is €500,000. The extra additional deduction is 45% of the growth in expenses for wages and purchased services. This means growth by reference to all the qualifying expenses under the Act, focusing on the arithmetical difference between current tax year’s and previous tax year’s amounts. The maximum extra deduction is €500,000. The extra deduction has no minimum amount.

5.1 Amount of the general additional deduction 

Under § 4, subsection 1 of the Act, the general additional deduction is 50% of the total R&D-related wage costs and costs of purchased services qualifying for the deduction. The maximum deduction is €500,000 for one tax year (under § 4, subsection 2 of the Act). No general additional deduction is allowed if the deductible amount stays below €5,000 (under § 4, subsection 3 of the Act).

The general deduction’s base can include no purchased-service costs that serve as the base for the taxpayer’s claim for the additional deduction for R&D co-operation, referred in the Act on an additional deduction for research and development in tax years 2021–2027 (for more information, see section 6.2 of this guide). In the same way, costs covered by direct state subsidies or any other category of public support must be excluded from the base due to provisions in § 6, subsection 1 of the Act (for more information, see section 6.1).

The minimum and maximum amounts only concern one tax year and one company (taxpayer entity). How the maximum limit or the minimum limit is reached is separately evaluated for every tax year and company. For this reason, the calculation of the minimum amount is independent of factors like R&D activities being organised in the form of several different projects, or organised as a combination of other multiple arrangements related to research and development. 

The consequence of the rules that require separate evaluation for every tax year and taxpayer may be that no additional deduction can be claimed even if the qualifying invoices relating to one R&D project amount at least to €10 000 but are spread out across two or more tax years.

Due to the requirement that the general additional deduction is evaluated separately for every tax year, if the taxpayer conducts both a business operation and an agricultural operation, the minimum threshold applies to the total that relates both to the business source of income and to the agricultural source of income together. This way, if such a total of qualifying expenses is €10,000 or higher, the taxpayer is entitled to claim the deduction. For each one of the sources of income, the additional deduction’s amount is calculated by reference to the costs connected to each source.

No full deduction of €500,000 is allowed simultaneously within the taxpayer’s business source of income and within the taxpayer’s agricultural source of income. Instead, the maximum €500,000 for one tax year concerns the taxpayer’s entire conduct of operations. If a situation arose for a taxpayer that has operations both in a business source and in an agricultural source, where qualifying expenses would have been paid to such an extent that the taxpayer-specific maximum limit is reached, the taxpayer can independently determine the proportions of how much of the qualifying expenses should be claimed within each one of the two sources of income.

The maximum and minimum limits of the general additional deduction need to be applied in the same way irrespective of the length of the taxpayers accounting year or accounting period(s), which make up the taxpayer’s tax year. Accordingly, the minimum and maximum limits are €5,000 and €500,000 even if the taxpayer’s accounting year is shorter or longer than 12 months.

5.2 Amount of the extra additional deduction 

Under § 3, subsection 4 of the Act, the extra additional deduction is calculated by reference to the true growth of the total R&D costs of wages and purchased services, qualifying for the deduction within the meaning of § 3, subsection 1 of the Act. Under § 5, subsection 1 of the Act, the general additional deduction is 45% of the growth in total R&D costs of wages and purchased services qualifying for the deduction within the meaning of § 3, subsection 4 of the Act.

It is deemed that the base for the extra additional deduction has grown, if the taxpayer’s all expenses qualifying as the base for the combined deduction have grown, from the first tax year to the second tax year. In other words, if all the acceptable amounts of expenses being part of the combined deduction’s base have become greater, compared to previous tax year, the taxpayer is entitled to claim the extra additional deduction. Tax year 2024 is the first year that taxpayers can submit the first extra deduction claim for.

In order to evaluate whether R&D expenses have grown from the year before, the comparison must be made against the previous year’s all expenses, which could have been included in the general deduction’s base one year ago. Accordingly, the above total is then brought into comparison with the tax year’s expenses, consisting of wages and purchased services, which could be included in the general additional deduction’s base now. Whether the taxpayer actually claimed the general deduction last year or this year is not important, because the calculation only needs to take account of the values described above. In the same way, because the calculation only needs to take account of the values described above, no importance is attached to the general deduction’s maximum limit that restricts the amount of the general deduction, either concerning the previous tax year or the current tax year.

For calculating the base for the extra additional deduction, the year-on-year comparison can also include the purchased services the taxpayer has already included – or could have included – when claiming an additional deduction for R&D co-operation as provided in the Act on an additional deduction for R&D expenses in tax years 2021 to 2027. However, expenses covered by direct state subsidies or any other category of public suppor must be excluded from the base, as provided in § 6, subsection 1 of the Act (for more information, see section 6.1 of this guide).

If the taxpayer is only starting the R&D activities, and no qualifying expenses were paid at all during the previous tax year, the comparison for the calculation of the extra deduction still needs to refer to the acceptable R&D expenses of the year before, which in this case would only amount to zero euros.

The maximum extra deduction is €500,000 (in accordance with the Act’s section 5, subsection 2). The maximum amount concerns one tax year and one taxpayer. As a result, for taxpayers that carry on both business and agriculture, no full deductions of €500,000 are allowed simultaneously within the taxpayer’s business source of income and within the taxpayer’s agricultural source of income. Instead, the maximum €500,000 for one tax year concerns the taxpayer’s entire conduct of operations. If a taxpayer has operations both in a business and in an agricultural source and the expenses qualifying for the additional deduction would exceed the tax year's maximum limit, the taxpayer can independently determine the proportions of how much should be claimed within each one of the two sources of income (for more information, see the examples presented in section 5.1 concerning the general additional deduction’s taxpayer-specific and tax year-specific thresholds).

The extra deduction has no minimum amount.

The calculation to arrive at the extra additional deduction needs to stay unchanged irrespective of the length of the taxpayer’s accounting period(s) which make up the taxpayer’s previous tax year, or current tax year. This means that the qualifying R&D costs within the meaning of the Act of the current tax year, must be compared with those of the previous tax year, although it may be that the taxpayer’s accounting period is longer or shorter than 12 months.

6 Amounts of the taxpayer’s additional deductions in special circumstances

If the taxpayer company is subjected to a M&A transaction or if the company is paid various forms of public financial support, this can affect the amount of the general and the extra additional deductions. No claim for a general additional deduction based on purchased services can be made if the service costs are simultaneously referred to in the taxpayer’s claim for an additional deduction for R&D co-operation.

6.1 Public financial support for the taxpayer’s R&D project

Various forms of public financial support can affect the amount of the combined deduction. Under § 6, subsection 1 of the Act, no additional deductions are granted if direct state subsidy other public financial support was given to the taxpayer for covering expenses which otherwise would qualify for the deductions’ base. For this reason, the taxpayer can only claim the combined deduction for its expenses that remain outside of the public financial support’s coverage. ‘Public financial support’ means direct state subsidies or any other category of public support. The support referred to by the provisions of the Act may be granted by Business Finland, ELY Centres, and others. However, if the taxpayer entity borrows money in order to pursue its R&D project, it is not deemed ‘public financial support’ under the definition set out in § 6, subsection 1 of the Act.

For calculating the additional deductions, the first step it to subtract the public-support money from the deductions’ base. After that, the remaining amount of qualifying costs will serve as the new base for calculating the deductions. With regard to the extra deduction, the calculation needs to take account of the public support’s impact on the deduction base for the previous tax year, and correspondingly, its impact on the base for the current tax year.

It may be that the taxpayer is granted a general-purpose public financial support for an R&D project. Such support is directed to all the costs of the R&D project. The support’s impact on the combined deduction depends on the amount received and on the project’s actual volumes of wage costs, costs for purchased services, and other costs. If the amount of the general-purpose support is lower than the costs of the project that are unrelated to wages and purchased services, it is deemed that the support is entirely for “other” expenses, which means that it has no impact on how much the taxpayer can claim as its additional deductions for the tax year. If the amount of the general-purpose support is higher than the project's "other" expenses, it is deemed that the support first covers all the "other" expenses up to their full amount, and then, the support money left over would cover the taxpayer’s wage costs and costs of purchased services. In this case, the base for the deductions is deemed as consisting of the remaining part of the wage costs and purchased-service costs, i.e. of what is left when the financial support has been deducted. If the general-purpose support covers the R&D project fully, the taxpayer cannot claim the combined deduction at all.

In general, the decision letter received from the public body granting the financial support will indicate the cost categories of the taxpayer’s R&D activity that the support should cover. To the extent that the financial support covers expenses outside of wage and purchased-service costs, the fact that the taxpayer receives support does not affect the base for the combined deduction.

If based on the request for the financial support, or based on the official decision concerning the giving of financial support, the public body expressly intends to cover wage costs and purchased services connected to the taxpayer’s R&D project, the taxpayer can only claim the combined deduction with regard to costs that the support does not cover.

It may be that after the public financial support is received, the base shrinks down to a level below the minimum threshold of €5,000 of the general additional deduction. In this case, the taxpayer can no longer claim the deduction at all.

6.2 The relationship between the additional deductions and the deduction for R&D co-operation available 2021—2027 

As provided in § 6, subsection 2 of the Act, taxpayers cannot claim the general additional deduction based on costs of services relating to R&D activities inasmuch as the taxpayer has already claimed an additional deduction, concerning the same costs, under the Act on an additional deduction for research and development in tax years 2021–2027 (Laki tutkimus- ja kehittämistoiminnan lisävähennyksestä verovuosina 2021-2027 (1078/2020). Accordingly, if the taxpayer claims a deduction for R&D co-operation for the tax year, it may have an impact on the amount of the general additional deduction.

If the conditions are met for both deductions, the taxpayer is free to choose which part of the expenses would connect with a claim for the deduction for R&D co-operation, and correspondingly, which part with a claim for the general additional deduction. Due to the fact that the requirements are more stringent for the deduction for R&D co-operation, the costs that qualify for that deduction often also satisfy the requirements of the combined deduction concerning costs for purchased services. From this, it follows that costs qualifying acceptably for deductions based on R&D co-operation are almost always considered qualifying costs for the general additional deduction. However, the purchased-service costs that qualify for the general deduction are not necessarily acceptable for the deduction for R&D co-operation.

To claim the deduction based on R&D co-operation does not cause any adjustment to the cost amounts applied to the calculation for arriving at the base of the extra additional deduction, where all the qualifying costs for the current tax year and the same for the previous tax year are compared. This means that from the perspective of submitting a claim for the extra deduction, it is not important whether the taxpayer – who has had costs that satisfy the requirements provided in both legal acts – chooses to claim the deduction for R&D co-operation or the general additional deduction.

6.3 Effect of M&A transactions  

M&A transactions such as mergers (§52a of the EVL), demergers (§52c of the EVL), transfer of assets (§52d of the EVL), or transfers of a business unit from one company to another may affect the amount of the deductions which the taxpayer company participating in the transaction can claim.

Companies that merge into another, and companies dividing themselves in a demerger, can claim the deduction for purposes of the company’s tax assessment, for the final tax year (the year of merging or demerging), on the basis of cost that, under the rules of the EVL or MVL, can be deducted in the company’s tax assessment. Correspondingly, a company transferring assets or a business unit to another company can claim a combined deduction in reference to the costs that relate to the period before the company’s M&A transaction, i.e. before the transfer. In situations where the taxpayer’s liability to settle a cost invoice arises after a completed M&A transaction, the receiving company is the one that can claim the combined deduction connected to the R&D activity that was transferred. The Act’s provisions concerning the minimum limit of the deduction, among other provisions and rules, must be adhered to also when a corporate arrangement is made, or has been made.

Not only for the general additional deduction, but also for the extra additional deduction, any M&A transactions need to be taken into account. The company being merged or demerged can claim the extra deduction in its assessment for the tax year that ends in the merger/demerger if the amount of the costs that qualify for the combined deduction on that tax year is greater than the costs on the previous tax year. The receiving company in a merger/demerger has the right to claim an extra additional deduction on the basis of the costs that relate to the received R&D activities provided that the liability to settle the cost invoice has arisen after the merger or demerger is finalised.

To calculate the amount of growth in the costs, between the previous tax year and the current tax year, the qualifying costs need to be taken into account that concern both the receiving company, and the merging company(ies) or the demerging company. In the case of a merger that involves the founding of a new company that becomes the “receiving” company, the growth calculation requires that the current tax year’s costs at the new company be compared to the previous tax year’s costs at the old companies that merged into it. In the case of a merger that involves an integration of the merging company with an existing company, i.e., the receiving company, the growth calculation requires comparison between the current tax year’s total costs with the sum of the previous tax year’s costs, both companies included.

In the case of a demerger, the deduction’s base for the receiving company, and for the business unit that it received in the demerger, needs to be compared with the corresponding total costs from previous year.

In the case of a transfer of assets or an acquisition of a business unit, the receiving company is not in the same legal position as in a merger or demerger, because merger and demerger are universal successions, and for this reason, the comparison has to be made only between the previous tax year’s qualifying costs at the receiving company and the current tax year’s qualifying costs at the receiving company.

The provisions of § 7 of the Act contain important restrictions of the deductible amount for the receiving company in connection with M&A transactions: mergers, demergers, transfer of assets, transfers of a business unit from one company to another. Under § 7, subsection 1, when a merger takes place, within the meaning of § 52a of the Act on the taxation of business income (EVL), the receiving company’s tax assessment, amount equalling the maximum deductions for wage and purchased-service costs, as defined in § 3 and § 4 of the Act, can be deductible in the tax assessment of the receiving company, but the deduction made on the basis of the transferred R&D activity in the merged company’s assessment during the same tax year must first be subtracted. Under § 7, subsection 2, the provisions in the previous subsection 1 concerning mergers also apply to demergers as referred to in § 52c of the EVL, and to transfers of assets as referred to in § 52d of the EVL, and to the tax assessment of the receiving company in circumstances where the company has acquired a business unit.

Based on the rules laid down in § 7 of the Act, the corporate entities participating in mergers, demergers, transfers of assets, transfers of a business, and carrying out R&D activities that relate to the business or agriculture transferred in M&A transactions, cannot claim a general additional deduction that would exceed €500,000 in total for a tax year, nor an extra additional deduction that would exceed €500,000 in total for a tax year. In other words, the receiving or acquiring company must take into account the deductions which the opposite party in the M&A transaction has already claimed on the basis of the transferred R&D activity in its assessment concerning the same tax year.

If the final accounting period’s end date in the merging company, the final accounting period’s end date in the company being demerged, or the accounting period’s end date in a company from which a business unit is transferred away, falls within a different calendar year compared to the receiving/acquiring company, the provisions of § 7 of the Act pose no restriction to the receiving company to claim the combined deduction. The reason is that the Act’s restriction of deductibility is tax year-specific.

It may be that companies concerned by various M&A transactions conduct some other projects of research and development other than the R&D activities being transferred due to a merger, etc. for which the companies have costs qualifying for the additional deduction. The provisions of § 7 of the Act pose no restriction to the receiving/acquiring company to claim the combined deduction, other than concerning the R&D activity that was transferred. However, the additional deduction’s aggregate total amount, which includes the transferred R&D activity and the receiving company’s other R&D activity, is subject to the maximum limit of €500,000. Not only the receiving company but also the merging company, the demerging company and the company from where assets are transferred can claim a general and an extra additional deduction in tax assessment, subject to the maximum limit of €500,000.

6.4 Restriction relating to intra-group contributions 

Under the provisions of § 6, subsection 3 of the Act no additional deductions can be made against a received amount of intra-group contribution, as referred to in the Act governing intra-group contributions (Laki konserniavustuksesta verotuksessa (825/1986). Because of the above rules, it may be that an intra-group contribution, that a limited liability company or a cooperative has received, is deemed to be subject to tax, although the tax authorities confirm an allowable loss for the tax year concerned, as a result of the additional deductions that were claimed. The intra-group contribution’s impact must be taken into account when claiming the general additional deduction as well as the extra additional deduction. In the examples below, the tax year’s general additional deduction plus the tax year’s extra additional deduction is a sum referred to as the “combined deduction”.

If the economic result for the year turns out to be negative for the taxpayer company due to a claimed combined deduction and due to a paid-out intra-group contribution, it is necessary to subtract the intra-group contribution first, from the company’s profits, in accordance with the requirements laid down by the Act governing intra-group contributions (Laki konserniavustuksesta verotuksessa (825/1986).

7 Claiming the additional deductions; submitting an appeal 

Taxpayers that conduct business must claim the additional deductions against their business profits; and correspondingly, taxpayer entities that pursue agricultural activities – against the taxpayer’s profits from agriculture.

In accordance with § 6, subsection 4 of the Act, both the general and the extra deductions are included in the taxpayer’s allowable loss for the year, relevant to the taxpayer’s business income source, or relevant to the taxpayer’s agricultural income source. In accordance with § 119, subsection 1 of the Act on income tax, loss for an income source is deductible against the profits belonging to the same source of income concerned by the loss, and carry-forward is available across the next 10 tax years, as income is generated.

The additional deductions can be claimed regardless of whether the tax year’s economic result turns out to be profits or loss. From this, it follows that a granted additional deduction can make the tax year’s loss heavier. In the same way, a granted additional deduction can change the tax year’s economic result from profits into loss.

The tax authorities grant the additional deductions by reference to a deduction claim that the taxpayer has elected to submit. This means that making a claim for the general or extra additional deduction is not required of the taxpayer, but instead, the taxpayer can claim the general additional deduction, the extra additional deduction, or both of the two additional deductions if the requirements of the Act are fulfilled.

The taxpayer must claim the deduction on their income tax return. Under § 8, subsection 1 of the Act, the taxpayer must give sufficient details to the tax authority on how the requirements are fulfilled, and on the subcontractor invoices that constitute the deduction’s base. For more information on how to claim the additional deductions on the income tax return form 67Y, see the appropriate enclosure form’s instructions for completion.

According to § 8, subsection 1 of the Act, the claims for the deductions must be submitted before tax-assessment end date. According to § 49, subsections 1 and 4 of the Act on assessment procedure, ‘end date’ is different for every taxpayer, and is the date indicated on the tax decision issued by the Tax Administration. In other words, the taxpayer needs to claim the additional deductions before the date when the Tax Administration finishes the year’s tax assessment of the taxpayer concerned.

According to § 8, subsection 2 of the Act, concerning circumstances other than the above, the provisions of the Act on assessment procedure generally apply to the additional deduction. From this, it follows that when the taxpayer submits an appeal concerning the additional deductions, the usual tax rules governing appeals are applicable. For more information about the appeal procedure (in Finnish and Swedish), see the Tax Administration’s in-depth guide “Appeal procedure applied to the Tax Administration’s decisions” — Muutoksenhaku Verohallinnon päätökseen. In situations where questions arise on how provisions of the Act are applied, taxpayers can also apply for an advance ruling. For guidance on how to apply for an advance ruling, see the Tax Administration’s guidance “Applying for an advance ruling and the decision issued” — Ennakkoratkaisuhakemuksen tekeminen ja siihen annettava päätös (available in Finnish and Swedish).

8 The Act’s entry into force; information on how its provisions are applied 

As set out in § 9 of the Act (the Act on additional deductions based on expenses of R&D activities (Laki tutkimus- ja kehittämistoiminnan menoihin perustuvista lisävähennyksistä verotuksessa (1298/2022))), the Act came into force 1 January 2023 and continues to be in force indefinitely. The Act’s provisions concerning the general deduction are applied on the taxation for the 2023 tax year for the first time. Accordingly, taxpayers can claim the general deduction for the first time for tax year 2023, by reference to that year’s costs for an R&D activity, which fulfills the Act’s requirements.

The Act’s provisions governing the extra additional deduction, i.e. § 3, subsection 4, and § 5, are applied on the taxation for the 2024 tax year for the first time. This means that no extra additional deduction can yet be granted for purposes of the taxpayer’s assessment concerning tax year 2023.