Research and development tax deduction: New rules, greater savings

What the research and development tax deduction is

We have already described the fundamental principles of the research and development tax deduction in greater detail in our previous article.

Key changes effective from 2026

• A legislative amendment approved in 2025 significantly expands the available benefits: for expenses on research and development up to fifty million Czech crowns per year, companies may newly deduct 150 % of the cost base.
• For the portion of the deduction exceeding fifty million Czech crowns, the standard 100 % deduction continues to apply.
• The period during which unused deductions may be claimed is extended from the original three to five years.
• Administrative obligations are reduced: the documentation requirements for research and development projects become less formalised, and certain previously mandatory elements – such as detailed qualifications of every team member – are removed.
• The purpose of these changes is to make the deduction more accessible, particularly for small and medium-sized enterprises, as historically most deductions were utilised by large corporations.

Points to watch – risks and common mistakes

• If a project is not clearly defined – including its objective, the innovative element, and the technical uncertainty involved – the deduction may be rejected. Recent court decisions confirm that tax authorities closely assess the substantive quality of research and development projects.
• Detailed record-keeping is essential. Companies must maintain clear documentation of wages, materials, external services, and depreciation. Organisations that conduct research and development informally, as part of their routine operations, often lack complete evidence, which is a frequent reason for disputes or denial of the deduction.
• Although the new regime reduces administrative burdens, it may require companies to strengthen internal processes, particularly for projects spanning multiple years.