In order to promote innovation, the Income Tax Code and specifically Article 71A provides tax incentives for the development of patents. In particular, companies exploiting internationally recognized patents which are registered in their name will be exempt from income tax for the profits resulting from their exploitation for three consecutive years.
Περιεχόμενα Άρθρου
Tax Incentives for Patent Development
In accordance with the provisions of article 71, they are exempt from income tax for three consecutive years, starting from the year in which revenue was first realized from the sale of products of its production, for the production of which an internationally recognized patent was used in the name of the same company by which was developed.
The amount of the exemption results from the following act:
Exemption amount = (Eligible research and development costs / Total research and development costs) X Profits from the exploitation of the patent
Eligible research and development costs may be increased by 30%, provided that they do not exceed the amount of total research and development costs.
The exemption from income tax for the profits in question can also benefit newly founded or existing companies in which, during their formation or the increase of their share capital or corporate capital, an internationally recognized patent is contributed by the founder, shareholder or partner.
What is defined as “Eligible research and development expenditure”
The amount of research and development costs, which are carried out, during the current and previous tax years by the company itself or have been assigned to third parties, unrelated to the company, and are directly related to the creation, development, or improvement of the patent (depreciation, current operating expenses, salaries of each level of staff, expenses for domestic and international travel, expenses for a wide range of consumables, and expenses for patent issuance).
What is defined as “Total Research and Development Expenditure”
All eligible and non-eligible research and development expenses, directly related to the creation, development, or improvement of the
patent and incurred during the current and previous tax years.
What is defined as “Profits from the exploitation of the patent”
“Profits from the exploitation of the patent” is defined as the income obtained in return for the use or the right to use the patent rights, as well as the proceeds from the sale of the patents, after deducting the eligible expenses for research and development, which correspond to these incomes and which were realized in the current tax year.
Also, profits from the exploitation of the patent are also understood as the profits from the sale of products produced by the company, regardless of whether they were produced in the company’s own facilities or those of third parties, for which a patent was used, to the extent that they correspond to the use of the patent.
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Prerequisites for receiving the tax incentive
- There is a link to the research and development costs incurred by the company to develop the patent
- The company makes profits from the exploitation of the patent
- The patent must be valid until the last day of the use for which the exemption is requested
What is defined as an “Internationally Recognized Patent”
An “Internationally Recognized Patent” is defined as a patent for which a patent has been granted that falls under at least one (1) of the following cases:
- “European Patent”, granted by the European Patent Office and registered in Greece.
- “Patent”, which is registered in the Industrial Property Organization (IPO) excluding Utility Model Certificates (UPM), which is also registered in another state that:
- has acceded to the European Patent Convention or cooperates under it, or is a member of O.O.S.A., or
- in the status of a candidate country for accession or in the status of enhanced commitment.
Procedure for recognizing and receiving a tax incentive
- The interested company submits an application for affiliation to the General Secretariat of Industry of the Ministry of Economy and Development, which forwards it to the O.B.I.
- O.B.I. establishes, after a thorough examination of the supporting documents provided, that the internationally recognized patent was used for the production of the product or the provision of a service, in the year in which revenues from the sale of products or the provision of services were realized for the first time, and that this has according to the provisions herein developed by the company, and then issues a reasoned positive or negative opinion.
- The decision is forwarded to the General Secretariat of Industry in order for the Minister of Economy and Development to issue an approving or rejecting decision.
- The supporting documents submitted, which should be legally certified, include a copy of the Patent as well as a certificate of its validity or proof of payment of fees to the competent patent office for the uses for which the tax exemption is requested.
- The decision issued by the Ministry of Economy and Development includes the name of the business subject to the provisions of article 71A of Law 4172/2013, the product or service it produces or provides, as the case may be, as well as the uses for which it is the above affiliation applies.
- The above decision is notified to the Public Economic Service (PSO) to which the company is subject.
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