S.L. 123.82 Art. 11Calculation of deduction and tax credit. Cap. 325.

(1) In determining the total income of a company that incurs allowable R&D expenditure there shall be allowed a deduction equivalent to that expenditure: Provided that no deduction shall be allowed under the provisions of this rule in the case of any such expenditure on plant or machinery or premises, in respect of which any deduction is allowed under article 14(1)(f) and (j) of the Act.

(2) Where the R&D expenditure is incurred in the carrying and of an activity in the applicant’s main place of business in addition to the deduction referred to in sub-rule (1) the company shall be entitled -

(a) in respect of allowable R&D expenditure other than expenditure to which paragraph (b) refers, to a tax credit equivalent to a percentage of the said expenditure as shown in Table A of the Schedule, but not exceeding the threshold referred to in sub-rules (3) and (5);

(b) in respect of allowable R&D expenditure incurred in carrying out an approved R&D project that is financed partly by the Commission of the European Union under a framework programme, to a tax credit equivalent to a percentage of that expenditure as shown in Table C of the Schedule, but not exceeding the threshold referred to in sub-rules (4) and (5).

(3) Subject to sub-rule (5), the tax credit allowable under sub-rule (2)(a) in respect of a project shall not exceed -

(a) the threshold set out in Table B of the Schedule, if the project is carried out by a small or medium-sized enterprise; or

(b) the threshold set out in Table D of the Schedule in any other case.

(4) Subject to sub-rule (5), the total value of the tax credit allowable under sub-rule (2)(b) in respect of a project shall not exceed the threshold set out in Table E of the Schedule.

(5) Where the company in question has benefited from any State aid in respect of expenditure incurred in the carrying out of the project, other than as provided for in this Part, the threshold referred to in sub-rule (3) or (4), as the case may be, shall be reduced by the value of that other benefit.

(6) The correct calculation of the reduction mentioned in sub-rule (5), where applicable, shall be the sole responsibility of the applicant company.

(7) When the tax credit referred to in sub-rule (2)(a) or the tax credit referred to in sub-rule (2)(b), computed before taking into account the thresholds referred to in sub-rules (3), (4) and (5), exceeds the respective threshold, the said tax credit allowable in respect of each item of expenditure shall be reduced pro rata.

(8) The amount of the total tax credits allowable under this rule shall be subject to the applicable State aid intensity limitations, in particular those established in article 5a of Commission Regulation

(EC) No 70/2001 on the application of Articles 87 and 88 of the EC Treaty to State Aid to small and medium-sized enterprises (OJ L 10/33, 13.1.2001), as subsequently amended.

(9) The deduction and tax credit referred to in this rule shall be due for the year of assessment immediately following the year in which the relative expenditure is incurred:

Provided that:

(a) to the extent that a deduction or tax credit cannot be availed of in a year of assessment, it shall be carried forward to be availed of in subsequent years of assessment;

(b) a tax credit due under this Part shall not give rise to a right to a refund of tax;

(c) where, for a year of assessment, a company qualifies for a tax credit under the Business Promotion Act and also under the provisions of this Part, it shall avail itself of the tax credit under the Business Promotion Act before any set-off is made in respect of the tax credit due under this Part.