Innovation: IP structuring considerations for multinationals...exemption for capital gains realized...

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Global R&D Tax News

Issue No. 4January 2012

Innovation: IP structuring considerations for multinationals

PwC 1

introduced an R&D tax deduction of 140 percent to complement its innovation box regime. Hungary has enacted changes to its patent box regime, with a full exemption for capital gains realized on the alienation of qualifying intellectual property (IP) from an Hungarian company under certain circumstances.

Although a variety of factors affect a business’ decision to locate its R&D operations in a jurisdiction, in this issue we take a closer look at the incentives and challenges for businesses locating and developing their IP in Canada, Hungary, the Netherlands, the United Kingdom, and the United States.

I hope you find this issue informative and encourage you to visit us on the web by clicking here.

If you have any thoughts or comments on any of the topics covered, please contact me or any of our country contacts listed at the end of this issue.

Jim ShanahanLeader, Global R&D Incentives Group +1 (202) 414 1684 [email protected]

Welcome to our January issue of PwC’s Global R&D Tax News

As economies around the world struggle to recover, many governments are taking steps to make their R&D regimes attractive to multinational businesses.

In 2011, the United Kingdom introduced a “patent box” regime, in addition to moving to an above-the-line accounting system. Australia has made its research credit more generous with a rate of 40 percent. Singapore improved its productivity and innovation credit scheme to include an increased tax deduction for qualified R&D expenditures plus incentives for R&D carried out abroad. The Netherlands

Welcome

© 2012 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details

Global R&D Tax NewsJanuary 2012

http://www.pwc.com/gx/en/tax/global-research-development-incentives-group/global-research-development-incentives-group.jhtml

PwC 2© 2012 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details

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Save the date 2012 Global R&D Incentives Symposium


Emerging Innovation Tax Incentives Around the World

We hope you will join us for our second annual Global R&D Incentives Symposium in Washington, DC on Thursday, 10 May, 2012. The Symposium will provide you an update on how countries compete for corporations’ research activities and the resulting intellectual property. You will have the opportunity to discuss the latest R&D incentives with industry peers and PwC professionals. Our agenda topics include:

• Global planning structures associated with increased mobility of research activities and intellectual property, including implementation of the new UK “patent box”

• Innovation tax policy and controversy developments around the world

• How the United States should tax the returns to innovation

In the coming weeks we will send you an invitation with more information concerning our business program and details on how to register.


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preserved, reducing the domestic tax payable and effectively keeping the value of the R&D credit in the group.

It is hoped that the combination of reduced taxation on foreign earnings, an above-the-line R&D credit, and a 10% tax rate on profits from patents will make the UK much more attractive for investment and help in rebalancing the economy toward manufacturing and high technology as a basis for generating sustainable economic growth. The Patent Box incentive, to quote HM Revenue & Customs (HMRC), “is intended to encourage companies to locate high-value jobs and activities associated with the development, manufacture, and exploitation of patents in the UK.” The emphasis on jobs and the connection made with development and manufacturing helps indicate how the rules determining whether a UK company will be eligible are being drafted and how they will be applied, as explained in more detail below.

This is potentially a very significant tax saving for businesses and a key part of the Government’s objective of making the UK the most competitive tax regime in the G20. It is also part of a wider package of CT reform, including changing the taxation of foreign earnings (the Controlled Foreign Company or CFC rules) and modifying the UK R&D relief to provide it as a credit which can be recorded “above the line” against the actual cost of R&D rather than as a reduction in the tax charge in the profit and loss account. The R&D credit will be payable if the company has no tax liability, making it accessible to businesses with tax losses.

The credit will be particularly attractive to many foreign multinationals for which the current R&D relief saves UK tax only to cause more tax to be borne in the home territory because of a reduced foreign tax credit. Based on previous rulings, it is anticipated that the above-the-line R&D credit will be disregarded in the territory of the parent, e.g., the United States, so that the full foreign tax credit is

On 6 December 2011, the UK Government issued draft legislation to introduce a “Patent Box” tax incentive from 1 April 2013. The plan will tax income derived from the exploitation of patented intellectual property (IP) at 10%, compared to the 24% corporation tax (CT) rate in force at that time (dropping to 23% in 2013).

The UK Patent Box and IP Planning

This article focuses on several design features of the proposed UK Patent Box incentive. The first feature is the eligibility criteria and, in particular, what ownership of qualifying IP will be required of the UK subsidiary of a global group for the UK business to qualify. The second is the design of the method for computing the profit attracting the 10% rate. Both are generous (but with an issue in the computation method) but require careful planning if the best result is to be obtained.

At present, only draft legislation is available. It is expected that these features will remain substantially unchanged when the final legislation is implemented. In particular, the broad base of qualifying income-through inclusion of the entire profit from worldwide sales of products which incorporate just one patented invention, and by including all existing patents, not just ones obtained once the legislation is in effect – seems unlikely to be changed.



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the 10% markup is applied. A notional royalty of 3% is used, and the deduction at stage 3 (3% times £700k income) is rounded down to £20k.

This is illustrated in the table below for a business where RIPI is 70% of income and where £200k of the £560k costs allocated to the box on the pro rata basis (rather than streaming) are of the kind to which

The UK Patent Box and IP PlanningContinued

The basic calculationThe starting point in calculating eligible profits is to identify qualifying IP income - that term includes:

• Patent royalties and income from licensing;

• Patent infringement income;

• Notional royalties from process patents and from services that utilise patents (e.g., flight simulator training facility services);

• Income from the sale of patents; and

• Income from sale of a patented item or an item that physically incorporates a patented item, and receipts from spare parts and items designed to be incorporated into a patented item.

All of this income, called Relevant Intellectual Property Income (RIPI), is put in the patent “box.” The default is then to

allocate costs to this box in the ratio that RIPI is to total income. This results in the patent box profit (stage 1 of the calculation below).

As an alternative, a company can elect that the costs allocated to the patent box are allocated on a “just and reasonable” basis – referred to as “streaming”. In some cases – for example where licence income is a large proportion of RIPI – streaming is mandatory.

Stage 2 of the calculation then deducts a routine return from the patent box profit. The deduction is a mark up of 10% on the costs within the box, applied to a prescribed list of types of expenditure, principally people, premises, plant & machinery, and certain overheads, but excluding bought in materials and outsourced services.

Stage 3 then removes from the residual profit from stage 2 a notional marketing royalty to reflect the value of marketing intangibles.

Patent £’000

Non-patent £’000

Total £’000

Stage 1: split profits – pro rata or “streaming”

Turnover (say 70% of total is relevant IP income) 700 300 1,000

Cost (560) (240) (800)

Profit 140 60 200

Stage 2: 10% routine return on internal costs (200 of 560)

(20)

Stage 3: marketing assets royalty (c3% of patent income)

(20)

Patent box profit 100

Patent box deduction [ 100 x (24 -10)/24 ] (58)

Taxable profit 142

Tax payable (CT rate 24% at 1 April 2013) 34

Tax saved [CT rate 24% x 58] or 14% of 100 (14) (14)



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It is also recognised that rights may have potential application in a number of fields. Exclusivity can be satisfied if the UK company is given rights in respect of a territory but limited to application in only one field with rights to the same IP, but in respect of applications in other fields being granted to other entities. For example, exclusivity can be satisfied if the UK company is granted rights in respect of IP for a therapeutic product in humans while similar rights are granted to other companies in respect of veterinary applications.

This appears designed to enable UK subsidiaries using patented IP which is owned overseas to fall within the scheme. However, the UK company actually must exploit the IP, hence the reference to jobs associated with development and manufacturing, rather than just hold it passively; this is ensured through the active ownership test.

manufacturing in the UK within global organisations where it is recognised that IP may be legally owned outside the UK. This is particularly evident in the ownership condition as well as the development and active ownership tests.

Ownership of the IP is satisfied not only where the UK company is legal owner, but also where it holds an exclusive licence in respect of the IP and under the terms of the licence it is either entitled to bring any infringement proceedings in respect of the IP or to enjoy the majority of damages that might arise in connection with those proceedings. For exclusivity to be achieved the UK company must enjoy those rights to the exclusion of the owner but need only do so in respect of at least one entire country. However, where exclusivity is enjoyed for some territories and not others, the income has to be apportioned and only that for the exclusive territories the box.


Most, if not all other territories with a patent box regime require the profit attracting the reduced patent box rate to be computed as the “arm’s length” profit attributable to the patent IP – i.e., only the embedded patent value within a product. In contrast (as shown above), with the aim of a simple mechanism for smaller businesses the UK scheme allows the entire profit from product sales into the “box” and then strips out a routine return and marketing royalty from this number to try to arrive at broadly the same answer.

This has important consequences for planning, particularly because there is only one box – so all qualifying income is combined regardless of whether it contributes a margin more than the 10% routine return. The inclusion of low-margin products can diminish the level of profit in the box compared to the situation where only products with a margin greater than 10% were included. In fact, the above calculation can produce a patent box ‘loss’. While this is only a notional

loss, it has to be offset against patent box profits of other companies with patent box profits for the same year and if not exhausted is carried forward and reduces future period patent box profits.

On the other hand, the method above could produce an attractive answer, for example if the margins made on products that embody a patented invention are high. As an entire product can qualify – for example the whole car because there is a patented invention incorporated in the exhaust system – this provides much scope for planning.

The first step is to ensure the company is eligible. In many cases, this means using the license that grants rights to the patents to the UK company structured in the right way.

Eligibility

The eligibility criteria appear designed with the intention of supporting UK jobs connected with development and



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(as shown). However, this may have adverse tax consequences for multinationals in jurisdictions where overseas subsidiaries with large amounts of royalty income are taxed in the parent territory.

Another aspect is illustrated in the diagram below. Where rights are granted to more than one company in a territory, this will cause exclusivity to be failed. This problem can be addressed by granting exclusivity to a separate company


While the regime allows a UK company to qualify even if it has not developed the IP, if it is a group company it must meet the active ownership test. This requires the UK business to perform significant management activity in relation to the rights. However, remember that rights referred to are those for the territory for which the UK company has exclusivity, so this might be the UK or a number of other countries. The management activity that has to be conducted by the UK business includes functions such as deciding whether to maintain protection, grant licences, or research other applications for the invention.

Whether the UK’s activities are significant is measured in the context of the resource used, breadth of IP responsibility, or impact of decision vs similar activities in respect of the same rights performed by other group companies. Guidance has been issued suggesting that the UK

company need not take all the decisions on IP management nor does there have to be activity of this kind in every period but the company must be “actively involved” in plans and have “clear substantive responsibilities.” It appears that this will be an area of some subjectivity, but also one where the hurdles seem to have been set fairly low with the aim of enabling UK subsidiaries of global multinationals to qualify provided they are doing something more than passively holding the IP.

Care will be needed to document licenses to achieve exclusivity, provide the rights needed in respect of infringement, and identify the relevant IP. The exclusivity part requires particular attention.

As only the income from sales in territories where exclusivity is granted qualifies, at the least an apportionment will have to be done every period, but a much better result might be achievable if the territorial limits were extended.

Parent co (UK or overseas)

Parent co (UK or overseas)

UK 1 UK coUK 2

UK 1 business

UK 2 business

Patent X license

Patent X license

Exclusive patent X license



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products could be separated, the tax saved on the 15% margin product would be £402k. This can be achieved, for example by separating the businesses into different companies which may be unattractive due to cost and the effort involved-or by transferring the IP into another business or through structuring the exclusivity for the different products differently.

This is illustrated in the table below, which shows a company with patent box income of £110m, split equally between a product with a 15% margin and one with a 5% margin, and for which 75% of costs have to have the 10% routine return applied. The patent box tax saving is only £36k because the 5% margin product is generating a patent box “loss.” If these two


The Size of the Prize

HMRC have indicated that they view the system as very generous, especially the design to allow the entire product profit to be included even where there is only one patented invention in the product. It is also worth bearing in mind that the system does not relate only to patents granted after April 2013 when the regime comes into place, but applies with respect to all patents existing at that point in time. Additionally, where patents are granted some years after they are applied for, then the profits from sale of the products in the six years prior to the date of grant also can be included in the scheme. This result seems very generous and has the attraction of simplicity and clarity compared to the uncertainty and administrative effort that arise in performing the arm’s-length valuation of patent profits.

However, the 10% routine return is a hurdle that the company’s profits in the box must overcome before there is any incentive at all. As the types of costs to which the 10% routine return is applied go well beyond cost of sales and actually include all the company’s costs in arriving at taxable profits (with some minor adjustments for financing activities and R&D), this is the net rather than gross margin that has to be exceeded; consequently, it might be viewed as a high hurdle.

Also, as there is no ability to further subdivide the patent box and reflecting the fact that patents have a life of 20 years, a company might find that its patent box includes products with a range of margins, some of which may exceed 10% with others well below with the overall averaging of margins meaning that the 10% threshold is only exceeded by a small percentage or not at all.

Patent stream combined

15% margin 5% margin 10% margin

75% costs 75% costs Total

£ £ £

Patent revenues 55,000,000 55,000,000 110,000,000

Patent costs of sales 46,750,000 52,250,000 99,000,000

Patent profits (15%/5% net margin) 8,250,000 2,750,000 11,000,000

10% markup on costs (75% of costs) -3,506,250 -3,918,750 -7,425,000

Marketing asset royalty (3% revenues) -1,650,000 -1,650,000 -3,300,00

Patent Box profits 3,093,750 -2,818,750 275,000

Deduction (13/23 times profits) 1,748,641 -1,593,207 155,435

Tax saved at 23% CT rate 402,188 -366,438 35,750



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The intention of HRMC in this design was to achieve simplicity through the calculation mechanism and thereby reduce the administrative burden and cost for companies. It remains to be seen whether this has the effect of excluding so many companies who fall below the 10% margin that the incentive effect is severely diminished or, alternatively, cause a large number of companies to restructure their businesses so that that the higher margin activity gets the benefit but at the cost of all the administrative effort and implementation expense associated with doing this.

Conclusion

In summary, the new UK patent box provides an attractive opportunity for businesses to reduce the cost associated with exploitation of patented IP. While care is needed to get the best result, there is much flexibility in the design and some of the features are very generous. Now is therefore a good time for global businesses to think again about where they invest in innovation and whether the UK should be considered as a location where very low rates of tax can be achieved. This may entail changing the approach to what is patented, where IP is owned, or even restructuring the business model to put more of the activity associated with IP exploitation in the UK.

Contacts:

Diarmuid MacDougall [email protected] +(44) 1895 52 2112

Rachel Moore [email protected] +(44) 1223 55 2276



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Netherlands: New additional deduction for qualifying R&D expenses and expendituresWith currently existing measures such as the Innovation Box, the reduction of wage tax remittance for wage costs relating to R&D activities (“WBSO”), and the ability to amortize development costs for self-developed intangible assets at once, the Dutch government stimulates companies to invest in R&D activities.

R&D tax incentives can be provided at the front-end of the innovation cycle, in the year when research and development (R&D) costs and expenditures are incurred, and/or at the back-end in the years when income is generated from the exploitation of IP. The WBSO and the amortization at once for development costs of self developed intangible assets are examples of front-end tax incentives. The Innovation box is a back-end incentive that provides a reduced effective corporate income tax rate for certain income arising from the exploitation of IP.

To further encourage innovation in the Netherlands the Dutch government recently introduced an R&D deduction (“RDD”), another front-end incentive. The RDD is available for costs and investments relating to R&D activities performed after December 31, 2011.

While R&D wage costs already are tax-facilitated by means of the WBSO, the RDD is aimed specifically at other R&D expenses and expenditures. With the RDD, the Dutch government aims at treating investments in R&D-labor and investments in R&D-capital. For Dutch corporate income tax payers, the RDD applies in addition to the Innovation Box under which the income resulting from qualifying R&D activities effectively is taxed at a rate of 5% instead of the general corporate income tax rate of 25%.

Under the RDD, the tax payer can claim an additional deduction when calculating its taxable profit. The RDD is determined as a percentage of qualifying R&D expenses and expenditures. The percentage to be applied will be set by the Dutch Ministry of Finance annually. For 2012, the percentage is set at 40%. This means that as per January 1, 2012, an additional deduction of 40% of the qualifying R&D expenses and expenditures can be deducted from the Dutch taxable profit calculation.

Only R&D expenses (other than wage costs) and expenditures that are directly allocable to qualifying R&D activities are taken into account when determining the taxpayer’s RDD. Qualifying R&D activities in this respect are activities for which a WBSO declaration has been obtained (explained further below). The WBSO declaration is key in determining whether certain expenses and expenditures qualify for the RDD.

A Decree of the Dutch Ministry of Finance provides further guidance on the R&D expenses and expenditures qualifying for the RDD. These include (i) expenses related to outsourced R&D activities, (ii) financing expenses, (iii) labor expenses, and (iv) expenses relating to the lease of assets for which an affiliated entity was entitled to the RDD are not taken into account when determining the RDD. Amortization does not qualify as an expense for purposes of the RDD.

Expenditures in qualifying R&D assets are only taken into account if they relate to paid, new assets that were not put into use before. Qualifying expenditures are taken into account as from the year the assets are put into use. If in a calendar year an expenditure in an R&D asset exceeds EUR 1M, this expenditure is in a year only taken into account for 20%. Effectively, an R&D expenditure exceeding EUR 1M is taken into account over a five-year period. Expenditures that can only partially be allocated to qualifying R&D activities are taken into account for that part when determining the RDD.



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Netherlands: New additional deduction for qualifying R&D expenses and expenditures Continued

The RDD is available upon the taxpayer’s request. The application procedure is comparable to the application procedure for the WBSO. The taxpayer must file one request for both the WBSO and the RDD with a Dutch government agency called “Agency NL.” Different requests can be filed for different R&D projects taking place in one year. In the request the taxpayer has to provide an estimate of the expected qualifying R&D expenses and expenditures. Agency NL will issue an RDD-decision in which the RDD is determined on the basis of the estimates provided.

Within three months after the respective calendar year the tax payer has to inform Agency NL about the actual amount of qualifying R&D expenses and expenditures. Agency NL will issue a corrective RDD decision if the actual amount of qualifying R&D expenses and expenditures for the year is lower than estimated. The actual RDD in the corrective decision can be deducted from the taxable profit. The RDD-decision issued on the basis of the estimated qualifying R&D expenses and expenditures will not be amended if the actual qualifying R&D expenses and expenditures will be higher than estimated, i.e. the amount of RDD will not be increased.

Contact:

Auke Lamers [email protected] + 1 (646) 471 0570

Ruben van der Heide [email protected] +1 (646) 471-9986



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• Tax credits

Companies aiming to perform R&D; related investment of at least HUF 100 million may apply for this tax incentive, which as a practical matter means a tax credit up to 80% of the annual corporate income tax liability in ten years calculated from the capitalisation of the investment.

Utilisation phase

In the case of IP developed through R&D activity or originated from other sources, further corporate income tax benefits are available.

• Patent box regime

The Hungarian patent box regime, in existence since 2003, provides that companies owning qualified IP may deduct 50 percent of the amount of royalty income with respect to qualified IP. This deduction, along with other special deductions available, may not exceed 50 percent of the company’s pre-tax profit.

Alternatively, if the costs of R&D activities are capitalised, companies can reduce their corporate tax base by 200% of the annual depreciation of that capitalised R&D.

In addition, if the R&D activity is performed in cooperation with research institutions founded by universities or the Hungarian Academy of Sciences, and based on a written agreement, the taxpayer may claim tax base deduction of three times the R&D costs, up to a maximum of HUF 50 million, in addition to recording these against the pre-tax profit. In this case, the total deduction available is four times the R&D costs and expenses accounted by the company. The same tax base deduction is available for the company if the agreement is concluded with a similar institution of the European Economic Area.

Hungary enhances incentives for R&D activity

Enhancing R&D activity in Hungary has been a key focus of the government in recent years. Several tax benefits were implemented, while several non-tax benefits also became available to attract the R&D functions and IP management of multinational companies to the country. The advantaged treatment of the R&D in Hungary is also supported by the fact that European Institute of Innovation & Technology has its headquarters in Budapest.

The R&D tax incentive structure in Hungary gives rise to new opportunities and offers major benefits for setting up R&D centres in Hungary in the current tax environment. This article summarises the main characteristics of the Hungarian tax treatment of the R&D activities.

Hungary provides tax benefits to R&D projects in two phases: the development phase and the utilisation phase.

Development phase

In this phase, the Hungarian tax laws contain two types of incentives for R&D expenditures and investments: extra deductions from the corporate income tax base and tax credits that can be utilized to reduce the corporate income tax liability.

There are other R&D benefits with respect to other taxes (e.g., local business tax). In addition, there are several EU co-financed, non-refundable cash incentives available with respect to R&D activity as subsidies.

• Super-deductions

Double deduction of R&D costs incurred is possible if certain conditions are met. The double deduction results from the deduction of R&D costs and expenses from the tax base, as ordinary business expenses, plus an additional deduction from the corporate income tax base.



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Hungary enhances incentives for R&D activityContinued

• Transfers of the property described above (except for trademarks, business names, and business secrets).

Tax withheld on foreign source royalties is creditable against Hungarian tax liability, including royalties eligible for the patent box, in accordance with the tax treaties, where available, or the Hungarian domestic rules.

• Capital gain exception

In addition to the above, from 1 January 2012, there are further incentives available for companies holding IP. Any gain on the sale of qualifying IP is exempt from corporate income tax if the seller reports the acquisition of that IP to the Tax Authority and holds the IP for at least one year before its sale. Alternatively, if such reporting was not carried out, gains realised on a sale are still exempt if the taxable gain of the sale is used to purchase qualifying IP within three years after the sale.

Currently, Hungary’s corporate tax rate is 10 percent on taxable income up to EUR 1.7 million and 19 percent for income above that amount. Thus, the royalty income may be taxed at 5 percent depending on the company’s overall profitability. Extraordinary depreciations are also possible depending on the nature of the IP.

Qualified IP rights include patents and other protected intellectual works, know-how, trademarks, business names, business secrets, and copyrights. Specifically, the 50-percent deduction applies to income from:

• Right to exploit patents, design of assets under industrial law, and know-how;

• Right to use trademarks, business names, and business secrets;

• Right to use copyrights and similar rights attached to protected work, including software; and

Contact:

Gabriella Erdos +36 1 461 9130 gabriella:[email protected]

Norbert Izer +36 1 461 9433 [email protected]

Balázs Csomós +36 1 461 9760 [email protected]



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credit. The financial accounting rules require that companies prepare an estimated annual tax rate that is used for interim reporting. Notwithstanding estimations as to whether and when the credit might be reinstated, and as to the possible effective date if the credit were reinstated, it would not be appropriate to assume reinstatement for purposes of estimating the tax rate for annual periods that either begin after or cross over December 31, 2011.

For example, for a fiscal-year company, the estimated annual effective tax rate to be used each quarter during the year ending March 31, 2012, would take into consideration the effect of the research credit only for expenditures made in the first nine months of the year. That is, for purposes of quarterly reporting, the research credit’s expiration should be factored into the estimated annual tax rate, rather than separately uplifting the rate in periods after December 31, 2011. The

Taxpayers may elect a 14-percent alternative simplified credit (ASC) in lieu of the regular credit. The ASC uses the three prior years’ qualifying expenditures as the foundation to determine the base amount, whereas the regular credit includes qualifying expenditures and gross receipts from the mid-1980s.

The research credit has expired for the 14th time since it was first enacted in 1981.

Tax Provisions

Because of the credit’s expiration, benefits otherwise earned after December 31, 2011 should not be taken into account for financial reporting purposes unless or until the credit is retroactively extended. Similarly, such benefits cannot be taken into account for federal tax payment purposes.

As was the case with previous expirations of the credit, benefits cannot be recognized for financial statement purposes prior to enactment of legislation reinstating the

Companies that would be eligible to claim a section 41 research credit, or could book a benefit for research expenses paid or incurred after December 31, 2011, should be aware of the proper treatment and timing of recognizing such benefits in light of the expiration of the credit on that date.

The U.S. research tax credit has expired - What businesses need to know for now

annual estimated tax rate then would be remeasured if and when the tax law is changed to reinstate the credit. Any benefit related to a prior annual period would be recognized discretely in the interim period in which the tax law change was enacted. For example, if the credit were retroactively reinstated in May 2012, a company with a fiscal year ending March 31 would recognize the benefit for costs incurred from January 1 through March 31, 2012, as a discrete item in its quarterly reporting period ending June 30, 2012.

Potential Reinstatement of the Credit

In light of the Congressional agenda this year and the impact of the November elections, Congress may not act on the research credit and other expired business tax provisions until a possible “lame duck” session after the elections. One scenario could be another temporary extension of the credit, possibly retroactive to January 1, 2012.

Background

Under section 41, a taxpayer may claim a research credit equal to 20 percent of the amount by which the taxpayer’s qualified research expenses (QRE) for a tax year exceed its “base amount” for that year. That is, the credit generally is available with respect to incremental increases in qualified research.



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The final regulations make two key changes to final and temporary regulations issued in 2008:

• The new final regulations adopt the same election procedures for the ASC that are used for the now-repealed alternative incremental research credit (AIRC) under Reg. sec. 1.41-8.

• The new final regulations also make a change with respect to ASC calculations in the context of acquisitions and dispositions for tax years ending after June 9, 2011. Short tax years now must be prorated by the number of days in the year instead of the “number of months in the year.” Observation: This change will lead to more accurate calculations and remove uncertainty as to whether and how to include a partial month in making monthly calculations. Regarding previously filed returns using a monthly calculation for a short tax year, the final regulations allow taxpayers to amend such returns to reflect a daily calculation.

In connection with extending the credit, Congress may consider proposed changes to its structure. For example, Senate Finance Committee Chairman Max Baucus (D-MT) and ranking minority member Orrin Hatch (R-UT), together with eight co-sponsors, have introduced the Greater Research Opportunities with Tax Help Act of 2011 (GROWTH Act), which would:

• Extend the research credit permanently;

• Eliminate the regular research credit for periods after 2011; and

• Increase the ASC rate to 20 percent.

2011 Developments

Regulations on ASC election and calculation

The IRS in June 2011 issued final regula-tions regarding election and calculation of the ASC under section 41(c)(5).

The U.S. research tax credit has expired - What businesses need to know for now Continued

Regulations on reduced research credit

The IRS in July 2011 issued final regulations that amend the regulations concerning the election to claim the reduced research credit (RRC) under section 280C(c)(3). The latest regulations simplify how taxpayers make the RRC election.

Under the prior regulations, to make an election claiming the RRC on an original return, the taxpayer had to include a dollar amount for the tax year, which was difficult to estimate. Taxpayers now need only “clearly indicate” their intent to make the election. Note: As with the ASC, the RRC election cannot be made on an amended return. The election must be made on a timely filed return and is irrevocable.

With respect to controlled groups of corporations, the final regulations provide that each member of a controlled group of corporations, or a trade or business that is treated as being under common control,

may make the election to claim the RRC. However, only the common parent of a consolidated group may make the election on behalf of the members of a consolidated group.

Contact:

Jim Shanahan [email protected]

+1 (202) 414 1684

Tim Gogerty [email protected] +1 (646) 471 6547

Carolyn Singh [email protected] +1 (202) 346 5264



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1. Panel’s framework

The federal government’s objective was to provide recommendations on maximizing the effect of federal programs that contribute to innovation and create economic opportunities for business. The government recognized that despite its high level of federal R&D support, Canada continues to lag behind other countries in business R&D spending, rates of commercialization of new products and services, and productivity growth.

Specifically, the panel addressed the following questions:

• What federal initiatives are most effective in increasing business R&D and facilitating commercially relevant R&D partnerships?

• Is the current mix and design of tax incentives and direct support for business R&D and business focused R&D appropriate?

Narrowing Canada’s innovation gap

• What, if any, gaps are evident in the current suite of programming, and what might be done to fill the gaps?

The panel reviewed three types of federal programs intended to support R&D:

• the Scientific Research and Experimental Development (SR&ED) program tax credit;

• programs that support business R&D through:

– general support or

– sector-specific support; and

• programs funded through the federal granting councils, departments, and agencies that support commercially focused R&D, often performed by academic institutions.

The panel also studied business innovation in Canada and in relation to Canada’s peer group of highly developed countries.

On October 17, 2011, “Innovation Canada: A Call to Action,” was released by the Independent Panel on Federal Support to Research and Development (R&D). The report stems from a 2010 federal budget proposal calling for a comprehensive review of federal programs that support business innovation.

Guiding principles

The panel’s framework for action reflects eight guiding principles:

1. Support transformative programs – Programs to support business innovation should focus resources where market forces are unlikely to operate effectively or efficiently, and should address the full range of business innovation activities.

2. Require positive net benefit – The total benefit of any given program should be greater than the cost of funding, administering, and complying with the program.

3. Favour national scope and broad application – The core of the federal suite of business innovation programs should be large national programs of broad application that support business innovation activity generally.



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4. Build sector strategies collaboratively – There is also a role for programs tailored to the needs of specific sectors that the government identifies as being of strategic importance.

5. Require commercial success in regional innovation – Regionally oriented programs to support business innovation should focus on creating the capacity of firms in the target region to succeed in the arena of global competition.

6. Establish clear outcome objectives, appropriate scale, and a user-oriented approach – A program to foster business innovation should be designed to address a specific problem for which a government initiative is needed as part of the solution.

7. Design for flexibility – Federal innovation programs should themselves be innovative and flexible in their design, setting clear objectives and measurable outcomes, and then

Narrowing Canada’s innovation gapContinued

allowing program users to propose novel ways of meeting the objectives.

8. Assess effectiveness – More extensive performance management information is required to ensure an outcome-driven and user-oriented approach to federal support for business innovation.

2. Panel’s recommendations

Key messages

The report includes the following key messages, which drive the panel’s recommendations:

• Canada relies more heavily than most other countries on tax incentives, or indirect support, to encourage private sector innovation. Many other countries have achieved greater success by promoting innovation through a more balanced mix of direct and indirect support. Canada must be bolder—identifying and promoting collaborative

partnerships in areas of strategic importance and opportunity.

• Canada’s innovation support focuses too narrowly on subsidizing R&D, as opposed to other elements of the innovation value chain, including commercialization.

• Innovation programs in Canada must be more streamlined and coordinated, with businesses having a single point of contact for information and support.

• Small innovative firms must be encouraged to grow into large, globally competitive companies. Government should concentrate more on encouraging growth and rewarding success than on its current approach of providing support primarily to small businesses.

Recommendation 1

Create an Industrial Research and Innovation Council (IRIC), with a clear business innovation mandate (including

delivery of business-facing innovation programs, development of a business innovation talent strategy, and other duties over time), and enhance the impact of programs through consolidation and improved whole-of-government evaluation.

PwC comments

Canadian businesses would benefit from a “single-window” approach to federal innovation programs. The current system has been criticized by businesses as an uncoordinated patchwork of programs that are difficult to understand and access.

The recommended more central, over-arching approach to innovation funding that many countries (e.g., the U.K.) have implemented successfully is consistent with the trend in Canada toward streamlining federal government programs.

Implementation of an IRIC may not be easy. The council should be market-driven—nimble and responsive to changing market needs stemming from



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short technology lifecycles. The IRIC must be accountable, with the effectiveness of programs measured continually, taking into account changing business needs and recognizing the inherent uncertainty of risk-taking.

The federal, provincial, and territorial governments offer more than 500 programs to support businesses. The deep knowledge of the science, policies, and regulatory requirements needed for the programs to be effective often resides in the host departments such as agriculture, natural resource, environment, and health. Streamlining presents technical, staffing, resourcing, and political challenges. The process of streamlining could be lengthy and challenging.

Recommendation 2

Simplify the SR&ED program by basing the tax credit for small and medium-sized enterprises (SMEs) on labour-related costs. Redeploy funds from the tax credit

to a more complete set of direct support initiatives to help SMEs grow into larger, competitive firms.

PwC comments

The panel observed that federal innovation support emphasizes subsidizing R&D through tax incentives—as opposed to other elements of the innovation value chain, including commercialization and new product development—more heavily than is common in many other countries. Instead, other countries often offer more strategic, direct support to encourage innovative firms to grow in those areas where the country can be globally competitive.

The current SR&ED program spreads funding across all regions, industries, and institutions in the hope that companies become more competitive globally. The alternative to the current indirect funding approach is a direct approach, which is discretionary and may mean favouring

fewer companies and institutions with more emphasis on grants.

The panel was asked to develop recommendations that could be implemented without increasing overall cost. Therefore, shifting R&D support away from tax incentives and towards direct funding will require reducing the cost of the SR&ED program. Some of the savings will support direct funding measures for SMEs.

Recommendation 2.1—Simpler compliance and administration

The tax credit benefiting small and medium sized Canadian-controlled private corporations (CCPCs) should be based on labour-related costs in order to reduce compliance and administration costs. Because the credit would be calculated on a smaller cost base than at present, its rate would be increased. Over time, the government should also consider extending this new labour-based approach to all firms, provided it is able to

concurrently provide compensatory assistance to offset the negative impacts of this approach on large firms with high non-labour R&D costs.

PwC comments

This recommendation would result in a significant change to the current program. It could reduce the SR&ED funding SMEs currently receive. Longer term, it could also reduce the SR&ED funding for large corporations, particularly those that are not labour intensive.

In addition, we note the following:

1. Reducing compliance and administrative costs—A labour-based approach assumes that the compliance and administration costs of the SR&ED program come from computing qualified expenditures. In fact, project eligibility of the work (i.e., meeting the definition of SR&ED, particularly experimental development) is the dominant administrative issue many companies



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the incentive nature of the program. We believe that this would significantly reduce compliance and administrative costs.

Currently, the complexity of the program is mainly the result of industry being unable to consistently interpret the application policy and rules with respect to project eligibility. Perhaps a national joint conference of industry associations, government and claimants, similar to that held in Vancouver in 1998 [hyperlink to www.cra-arc.gc.ca/nwsrm/rlss/1998/m06/sredrsde-eng.html], would help to overcome these complexities.

2. Labour-based calculations disadvantage some businesses—Under the labour-based approach, small and medium-sized CCPCs will see a reduction from their current benefits if they:

• are capital intensive and/or have high non-labour expenditures; or

• require significant materials or compo-nents as part of the SR&ED process.

face. While a labour-based approach undoubtedly will help to reduce some compliance and administration costs, addressing administration costs related to project eligibility would have a greater effect.

The current SR&ED eligibility rules were largely developed in 1986 and have stood the test of time. However, the framework lends itself to broad interpretations that have varied as the administration of the program has changed. Often it has been argued that the incentive nature of the program has been overlooked in favour of a cost recovery audit approach. Some believe that compliance and administrative costs were much lower in earlier years when industry and the administration worked openly together to develop project eligibility requirements.

The panel did not suggest that the Canada Revenue Agency (CRA) work more closely with industry groups regarding the definition of SR&ED while keeping in mind


In these businesses, the proportion of non-labour expenditures often is so high that it is difficult to imagine an equivalent labour-based credit that could replace their current incentives. A higher credit rate likely will not adequately compensate for credits lost because of material and capital being removed from the SR&ED expenditure base. The panel has recognized the negative effect that a labour-based approach could have on large non-labour based R&D firms, but there may be a similar impact on some CCPCs.

3. Different program for large corporations—Under this recommendation, the SR&ED program for CCPCs, based on labour costs, will be distinct from the potentially more generous one for large corporations that will be entitled to claim SR&ED investment tax credits (ITCs) based on the current rules (assuming the SR&ED rules for large corporations remain unchanged). This will allow larger corporations to claim SR&ED materials, salary and wages, contract

payments for SR&ED, “all-or-substantially-all” new SR&ED capital expenditures, third-party payments, lease costs, shared-use equipment and overhead expenditures.

Limiting the program’s scope to labour expenses, as proposed, would create a bias toward labourintensive sectors, such as the information technology sector at the expense of non-labour intensive industries such as manufacturing. Prototyping and experimental production can be expensive, especially for CCPCs, and are essential in the innovation chain. Capital investment in tangible and intangible property also is an essential element to productivity and innovation.

4. Manufacturing industry could losespin-offbenefit—Under current rules, new equipment used all, or substantially all, in SR&ED receives SR&ED incentives in the year it becomes available for use—a tax policy regarded favourably by the manufacturing industry. This benefit will be lost.



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and we are pleased that the panel is supportive of this process. To improve this process, we note the following:

1. Clear guidance is essential—Before using a preclaim project review service, claimants will want to know if the work has a reasonable chance of satisfying SR&ED project eligibility rules. If not, claimants will be reluctant to go to the effort of applying for an opinion from the CRA. Therefore, the CRA will have to provide greater certainty on project eligibility that taxpayers can rely on.

2. Demand on CRA resources—Preclaim reviews of many or all projects will undoubtedly stretch the CRA’s resources.

3. Uncertainty will remain—In practice, no guarantee can be provided until a project has begun, and the activities are known and can be compared to the definition of SR&ED. The current preclaim review service is informal, and does not

5. Complexity remains regarding contract payments for SR&ED services—The panel suggests that eligible contract payments be reduced to 50%. The current complexity around contract payments comes from determining whether the tax incentives on the contract payment will be received by the payer or the performer. Simply allowing 50% of contract payments for SR&ED does not resolve that complexity. However, allowing the expenditure to be claimed by only one party, either the payer or the performer, could address this issue.

Recommendation 2.2—More predictable qualification

Improve the CRA’s preclaim project review service to provide firms with pre-approval of their eligibility for the credit.

PwC comments

PwC encourages claimants to use the preclaim review service when appropriate,


provide predictability. The final evaluation is based on a CRA review of the SR&ED work that was carried out by the claimant. Until then, it is difficult to add certainty. If the service expands to provide pre-approval, SR&ED claimants may have to make a formal written request to the CRA. If this process is too complex, it will add to the cost of compliance and could discourage taxpayer requests for pre-approval.

Recommendation 2.3—More cost effectiveness

Reduce the amount of SR&ED tax credit assistance by introducing incentives that encourage the growth and profitability of SMEs while decreasing the refundable portion of the credit over time. Redeploy the savings to fund new and/or enhanced support for innovation by SMEs, as proposed in the Panel’s other recommendations.

PwC comments

1. Implications of reduced ITCs—How the reduction of refundable ITCs would be implemented is unclear. The reduction would require CCPCs to find alternative funding for SR&ED projects. This could make it difficult for some to continue their R&D projects and possibly reduce the risk (and the potential rewards) that companies take in performing R&D.

2.TargetingbenefitstoCCPCs—This is a significant shift from a market-driven approach to R&D investment. A tax credit incentive regime has benefits: the playing field is levelled and the rules are established. Claimants that meet the three criteria are eligible for an incentive. Under the panel’s new approach to funding SMEs, claimants must convince the funding authority that they have a greater probability of achieving high R&D-based growth and profitability. Direct funding programs could also have significant compliance costs, because companies



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the program must neither add unnecessarily to the taxpayer’s compliance cost nor breach confidentiality.

Recommendation 2.5—Phased implementation and consultation

Adopt the proposed changes through a phased-in approach to give the business sector time to plan and adjust. There should be early consultations with the provinces on the proposed changes, given that they may want to consider adopting the same base as the federal government.

PwC comments

If any of the recommendations are adopted by the federal government, a gradual phase-in will be crucial to allow businesses to adjust. The SR&ED program is better known and understood than other incentive programs. Taxpayers conducting R&D rely on the SR&ED program as an important source of funding. Certainty and stability of funding programs are critical for companies

must try to demonstrate the potential for their innovation to be successful.

3. Provincial and territorial disparities—The provinces (except Prince Edward Island) and the Yukon have mirrored the federal SR&ED program. Regional disparities are likely to arise because the regions will want to ensure that their R&D funding is directed to the specific needs of their constituents.

Recommendation 2.4—More accountability

Provide data on the performance of the SR&ED tax credit on a regular basis to permit evaluation of its cost-effectiveness in stimulating R&D, innovation and productivity growth.

PwC comments

Understanding and evaluating the cost effectiveness of government programs is important. However, any data collected by the CRA to evaluate the performance of


investing in R&D because it is a long-term commitment and the payoff is not necessarily immediate.

PwC observations on Recommendation 2

1. Maintaining simplicity—The recommendations propose shifting towards direct funding and extending support to more phases of the innovation cycle. However, these changes must be achieved while maintaining a simple, predictable, cost-effective, and competitive SR&ED program.

2. International trade agreements—Any direct funding programs derived from these recommendations must not contravene international trade agreements.

3. Alternative tax mechanisms—The report does not consider alternative ways of supporting R&D through the tax system. Canada’s competitors are moving to greater use of “pull” drivers—low taxes on the rewards of innovation. In

particular, a growing trend spreading across Europe is the adoption of patent boxes—a pull incentive that permits income derived from intellectual property to be taxed at low rates.

The patent box mechanism targets the commercialization stage of innovation; firms benefit only if their R&D generates outputs. The U.K. has announced that it will introduce its version of a patent box in 2013. The Netherlands has recently made income from R&D projects eligible by expanding the patent box to an “innovation box.”

Recommendation 3

Make business innovation one of the core objectives of procurement, with the supporting initiatives to achieve this objective.



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In addition, revising procurement practices to shift the focus to dictating required needs and outcomes, rather than prescribing practices for achieving them, also will substantially encourage innovation.

Recommendation 4

Transform the institutes of the National Research Council (NRC) into a constellation of large-scale, sectoral collaborative R&D centres involving business, the university and the provinces, while transferring NRC public policy-related research activity to the appropriate federal agencies.

PwC comments

The Executive Summary of the report emphasizes that collaborations should take place in areas of strategic importance and opportunity for the economy. This is both critical and challenging.

PwC comments

Government procurement has been a key driver of innovation, especially in the United States and European countries. In Canada, common procurement practices focus on being highly prescriptive to ensure that bids are comparable. Bidders typically must show that they have repeatedly offered similar services of a similar scope. These two practices inhibit innovation.

The panel has recognized that Canada needs to leverage procurement. Using the Canadian Innovation Commercialization Program (CICP) is one way of doing this. However, the CICP will never be more than a fraction of total government spending, and we encourage the government to examine all areas of procurement to ensure that all relevant objectives, including promotion of innovation, are taken into account.


Prioritizing and selecting areas of importance is a difficult task in government. Perceptions of importance are complicated by legitimate differences in opinions, compounded by varying degrees of technological understanding and expectations about future returns.

Moreover, ensuring that investments in infrastructure are refreshed and evolve will not be straightforward. The Innovation Advisory Committee (IAC) recommended by the panel will be an important vehicle for contributing to this prioritization. This change implies a shift from low-risk investments spread broadly across the Canadian economy to higher-risk investments concentrated in areas based on subjective (informed, but nonetheless subjective) opinions. Achieving the desired changes in both culture and processes will require substantial investments in change management.

Recommendation 5

Help high-growth innovative firms access the risk capital they need through the establishment of new funds where gaps exist.

PwC comments

We fully support consideration of programs to provide firms access to risk capital. This is a key issue for growing companies, and will be particularly important if there is a move to a lower SR&ED base and more emphasis is placed on direct funding. We also encourage the government to consider the best practices of other countries when developing guidelines for investment incentives. In PwC’s report “Government’s Many Roles in Fostering Innovation.” PwC considered the important tax, legal and fiscal factors government can use to foster innovation. We found that countries that have been successful at fostering


http://www.pwc.com/gx/en/technology/publications/governments-role-in-fostering-innovation.jhtml

http://www.pwc.com/gx/en/technology/publications/governments-role-in-fostering-innovation.jhtml


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A competitive tax regime on royalty income could encourage both foreign-based companies as well as large multinationals to retain ownership of the IP in Canada. IP development and commercialization are both highly mobile activities. In a 2007 study, the Organisation of Economic Co-operation and Development (OECD) acknowledged that many countries promote these activities by providing a more lenient tax regime. For example, France taxes income derived from patents developed there at a 15% rate (less than half the normal corporate rate). More recently, the U.K. promised to introduce a “Patent Box” regime, similar to that in the Netherlands and Belgium, under which income from patents developed in the U.K. will be subject to a 10% tax rate rather than the normal 28%.

Creating funds for which the government selects the “winners” that benefit has risks. At the same time, we recognize that many

innovation have tended to build a tax platform that includes advantages for corporate owners and investors, such as low taxes, an R&D tax incentive regime, and an intellectual property (IP)/royalty payments tax regime, as well as other tax incentives and programs for capital investment.

Altering the competitive landscape that has driven large multinationals to own and exploit their IP outside Canada will likely require more than R&D incentives and a fund that provides risk capital. The exit strategy for emerging technology companies has been to sell their assets to foreign owned companies, particularly larger organizations that have access to more capital to allow future growth. When these companies sell their assets, larger organizations move ownership of the IP to more tax-advantaged countries.


countries concentrate limited funds in areas of strategic importance. We believe the use of a broad-based IAC (see Recommendation 6), along with the “side car” funding approach, are important tools to consider. We also urge the government to consider adopting more competitive rates to encourage IP ownership to remain in Canada, as well as the immigration of IP acquired outside Canada.

Recommendation 6

Establish a clear federal voice for innovation, and engage in a dialogue with the provinces to improve coordination and impact.

PwC comments

The panel argues that innovation is a national priority and the federal government should show leadership. It calls for a “whole of government” approach to innovation support, under which the existing Science, Technology

and Innovation Council (STIC) would be transformed to the IAC, charged with achieving goals related to business, science, and social innovation. Reporting on performance should be system-wide as opposed to just program-specific.

An IAC comprising representatives from industry, academia, and government across the country is critical to making the transition in innovation programming and achieving the benefits of innovation, such as knowledge spillovers across provincial and territorial boundaries. We agree that the federal government must take a leadership role and coordinate support across the provinces. We anticipate that the federal government will explore ways to avoid unnecessary duplication among levels of government.

We urge the federal government to monitor the effectiveness of its programs continuously, so that they remain relevant and responsive to shifts in the global economy and changing business needs.



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Clearly, time is needed for more evaluation and dialogue by industry and governments to ensure that desired outcomes are attainable under the panel’s recommendations. In particular, further study is needed on whether:

• the recommended Industrial Research and Innovation Council will make government programs more effective;

• more direct programs can be designed to achieve greater success in identifying profit-making innovations and products;

• government decision makers will be able to respond to business innovation and product development needs in a timely and strategic fashion;

• eligibility criteria could be developed for a tax-based incentive that would apply to both labour and capital;

Conclusion

While it is important to support other elements of the innovation value chain, including commercialization, Canada must also maintain a strong SR&ED program to allow market-driven R&D to continue to flourish alongside business innovation.

Effectively promoting innovation entails taking risks and choosing areas of strategic opportunities, along with government willingness to make the appropriate investment. This recipe is not straightforward, because it can involve allocating scarce taxpayer dollars through procurement projects, direct funding to businesses, and indirect funding through tax incentives and other programs.


• incentives could be developed that are tied to private-sector investment, such as flow-through shares, where the private sector picks the winners and losers; and

• tax incentives could be introduced

Contact:

Vik Sachdev [email protected] +1 (416) 869 2424

Shawn Reain [email protected] +1 (403) 509 6373



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PwC Global R&D Incentives Group

Australia Sandra Mason [email protected] + 61 (2) 8266 0470

Tim [email protected] + 61 (2) 8266 5436

Belgium Axel Smits [email protected] + 32 (3) 2593120

Thierry [email protected] + 32 (2) 7107422

Bertrand Vandepitte [email protected] + 1 646 471 8602

BrazilNelio [email protected] + 55 (11) 3674 2000

Canada Vik Sachdev [email protected] + 1 (416) 869 2424

Central Asia and CaucasusRobin [email protected] +1 (995) 32 250 8050

China

Charles Lee (South China)[email protected] + 86 (755) 8261 8899

Edward Shum (North China)[email protected] + 86 (10) 6533 2866

Peter Ng (Central China)[email protected] + 86 (21) 2323 1828

Czech Republic David [email protected] + 42 (02) 5115 2561

Denmark

Søren Jesper [email protected] + 45 3945 3945

France Rémi [email protected] + 33 (1) 5657 4154

Guillaume [email protected] +1 646 471 8240

Germany Thomas [email protected] + 49 30 2636 5297

Christian [email protected] + 49 30 2636 3592

Hungary Paul Grocott [email protected] + 36 (1) 461 9260

Andrea [email protected] + 36 (1) 461 9275

India Rahul Garg [email protected] + 91 (11) 2321 0543

Ireland Liam Diamond [email protected] + 353 (1) 792 6579

Stephen [email protected] + 353 (1) 792 6505

Israel Doron Sadan [email protected] + 972 (3) 7954584



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Japan Jack Bird [email protected] + 81 (03) 5251 2577

Ian McDade [email protected] + 81 (03) 5251 2190

KenyaGilles de [email protected] + 1 646 471 1301

Korea Dong-Keon Lee [email protected] + 82 (0) 2 709 0561

Luxembourg Alina Macoveiemail needed + 352 4948481

Mexico Luis Lozano [email protected] + 52 (0) 55 5263 6000 ext. 8648

Netherlands Richard Hiemstra [email protected] + 31 (20) 88 792 7618

Auke Lamers [email protected] + 1 (646) 471 0570

Jeroen van Dijk+1 088 792 31 [email protected]

Poland Andrzej [email protected] + 48 (61) 8505151

PortugalPedro [email protected] + (351) 225 433 131

PwC Global R&D Incentives Group Continued

RussiaDavid C. [email protected] + 7 (495) 232 5588

Singapore Elaine Ng [email protected] + (65) 6236 3627

Slovak Republic Christiana [email protected] + (421) 2 59 350 614

South Africa Bennie Botha [email protected] + (27) 12 429 0292

Gilles de [email protected] + 1 646 471 1301

Spain José Elías Tomé Gó[email protected] + (34) 915 684 292

Sweden Jorgen Haglund [email protected] + 46 (0) 8 55533151

SwitzerlandStefan [email protected] + 41 (58) 792 4482

Christian [email protected] + 1 (646) 471 5152

Taiwan Shuo-Yen Lin [email protected] + 886 (2) 27296666 3679


PwC 26

PwC Global R&D Incentives Group Continued

TurkeyKadir [email protected] + 90 (212) 326 6526

United Kingdom Diarmuid MacDougall [email protected] + (44) 1895 52 2112

Rachel [email protected] + (44) 1223 55 2276

United States Jim Shanahan* [email protected] + 1 (202) 414 1684

Jeff [email protected] + 1 415 498 5340

Tim Gogerty [email protected] + 1 (646) 471 6547

For more information about this issue or to subscribe to Global R&D Tax News, please visit us online using your mobile phone (QR reader required), or contact:

Carolyn Singh [email protected] +1 (202) 346 5264

*Global R&D Incentives Group Leader.


This document is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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