Detailed documentation for R&D deductions is essential to be able to claim tax benefit

In a recent decision, the SAC confirmed that a lack of clear documentation can lead to the tax authorities refusing a deduction without further examination of the content of the project in question. The SAC confirmed that if the documentation does not meet the formal criteria, the tax authority may not even proceed to assess the material content of the project and its contribution.

Moreover, the amendment to the Income Tax Act, which applies to tax audits initiated after 1 January 2024, allows the tax administrator to prove the content of the project documentation by other means of evidence in case of doubt. Thus, the new regulation allows for the supplementation of the already submitted documentation with additional means of evidence, but does not allow the supplementation of the already submitted approved project documentation if the original documentation does not meet the requirements laid down by law.

It therefore remains the case that project documentation must be prepared with great care. Projects should clearly define the objectives of the research, the methods of control and verification of the results, and all facts should be documented in detail in the event of an inspection by the tax authorities.