The logic of the corporate tax, income tax, VAT and social security advantages used by zone companies, and what to watch out for.
The best-known attraction of technology development zones is tax advantages. However, the scope of the advantages is often misunderstood: renting an office in the zone does not automatically mean that all earnings are exempt from tax. In this article we summarise the logic of the advantages and the most common mistakes. The information below is general; consult your accountant for details of application.
What does the earnings exemption apply to?
The exemption applies to earnings from software and R&D activities carried out in the zone. If a company also has activities such as consulting, hardware trading or production outside the zone, these incomes remain outside the exemption and must be calculated separately. It is therefore essential to separate technopark activity from other activities in the accounting records.
Staff income tax exemption
The wages of R&D, design and software personnel working in the zone for these activities are exempt from income tax. For the exemption to apply, the employee must actually work in the zone, the job description must relate to R&D or software, and the monthly staff notification must be given to the zone management on time. The wages of managers and sales staff are outside this scope.
Social security and VAT
For R&D personnel it is possible for part of the employer's insurance premium share to be covered by the Treasury; rates and periods are set in legislation. A VAT exemption applies to certain software deliveries and services. Which product or service falls within the scope should be checked before an invoice is issued.
The five most common mistakes
- Giving staff notifications late or incompletely
- Including staff who work outside the zone in the exemption
- Showing non-R&D income within exempt earnings
- Recording spending not related to the project as R&D expenditure
- Failing to submit the annual activity report on time
With the tax advantage calculator on our site you can see an estimated figure for your company. For an exact calculation, take the opinion of your company's accountant.
Records and document discipline
The most important condition for benefiting from the advantages without problems is to keep regular documentation. A separate file should be kept for each R&D project; the project timeline, work packages, staff job descriptions, expenditure documents and interim reports should be stored in this file. Being able to present the documents requested during an audit reduces the risk of administrative sanctions and secures exemption rights.
What to do at the start
Within the first 90 days after moving in, we recommend completing these: approval of the R&D and software project by the zone management, updating staff job descriptions, setting up a separate chart of accounts for technopark activity and giving the first monthly staff notification. Your relationship manager gives you a checklist for each of these steps.