Tax Incentives for making Greece an R&D hub

In an effort to attract new investments, stimulate the economy, and combat unemployment, the Greek government has introduced tax incentives under Article 22A of the Income Tax Code, as amended by L.5162/2024. These incentives specifically focus on companies engaged in scientific and technological research.

Expenses related to such research, including depreciation of equipment and instruments, can be deducted from a company’s gross revenue with a 100% increased deduction. Additional incentives apply under specific conditions:

1. Enhanced Deductions for External Research Services:
   Research expenses paid to organizations like startups registered in the National Startup Register, research centers, or universities (without links to the business) are eligible for deductions increased by 150%.
2. Enhanced Deductions for SMEs:
   Very small, small, and medium-sized enterprises (as per EU Recommendation 2003/361/EC) can deduct research expenses at 200% if these expenses exceed 20% of total annual expenses. Additionally, if the research costs of the current year are higher than the average of the previous two years, a further 15% deduction applies.

Companies that incur R&D expenses usually operate in industries such as:

• Information Technology (IT): Applications and software development, new communication technologies and tools.
• Biotechnology: RnD on biological products or propagation material and relevant processes.
• Pharmaceutical Industry: RnD on new drugs or treatments.
• Energy: Renewable energy sources or technologies to improve energy efficiency.
• Food and Beverages: New products or improvement production processes.

A company may fall under multiple deduction schemes; in this case, the most favorable one is applicable. If the increased deductions result in taxable losses, such losses can be carried forward for 5 years.

The General Secretariat for Research and Innovation is responsible for verifying and certifying the eligibility of the incurred RnD expenses. Companies shall prepare a full file with a description of the RnD projects and proof of relevant expenses (invoices, private agreements, payroll etc.) paid within the tax year. This file is delivered to the competent authority within the same deadline as filing of the corporate tax return. If the RnD expenses are over EUR 60,000, a compliance report from a certified auditor is required.

The tax incentive under Article 22A of the Greek Income Tax Code, represents a highly positive step in fostering innovation and economic growth. By offering increased tax deductions for scientific and technological research expenses, particularly for startups and SMEs, the government demonstrates a strong commitment to nurturing an innovative economy. Τhese policies not only bolster corporate profitability in the long term but also stimulate the broader economy, create high-value jobs, and strengthen Greece’s competitive edge in the global market.