The Effect of Grants Received by R&D and Design Centers on R&D and Design Deduction Calculation
In the seventh paragraph of Article 3 of the Law No. 5746 on Supporting Research, Development and Design Activities, it is stated that those who engage in R&D and innovation activities and design activities;
– public institutions and organizations,
– foundations established by law or that receive funds or loans from international institutions, public institutions and organizations under technology development project agreements to support R&D and innovation projects and design projects,
– or international funds,
the support they receive will be kept in a special fund account.
Also in the same article, this Fund;
– According to the Corporate Tax Law No. 5520, it will not be taken into account in determining the taxable income and the amount of R&D or design expenditure made in the relevant year,
– In the event that it is transferred to another account or withdrawn from the enterprise in any way other than addition to capital within five years following the accounting period in which it is obtained, the taxes not accrued on time are deemed to be canceled,
is provided for.
On the other hand, the Istanbul Tax Office gave the following opinion with its Special Tax Certificate dated 30/07/2013 and numbered 62030549-125[10-2012/71]-1129.
“According to these provisions and explanations, the amount of support provided by TÜBİTAK will not be taken into account as income in determining the corporate income, and your R&D expenditures made with this support will not be subject to R&D deduction. However, your expenditures made with the support provided by TUBITAK will be directly written as expense according to the place where they are made or will be amortized through depreciation if an economic asset subject to depreciation is purchased.
On the other hand, if your company purchases depreciable economic assets within the scope of R&D activities, the depreciation amount allocated in the relevant year will be considered as R&D expenditure, not the cost price of the economic asset. In the event that part of the financing of these depreciable economic assets is covered partly by your company and partly by the support provided by TÜBİTAK, the depreciation amount corresponding to the part covered by your company can be subject to R&D deduction, and R&D deduction cannot be utilized for the part corresponding to the support amount. It is natural that your other R&D expenditures that are not covered by the support can be subject to R&D deduction.”
Accordingly, the amount of support received will not be taken into account as income in determining the corporate income.
Expenditures made with the support will not be subject to R&D and design deductions. On the other hand, the expenditures made within the scope of the support will first be capitalized (together with other expenditures within the scope of the project), amortized through depreciation if the project is successful, and directly expensed if the project is unsuccessful.
How much of the support received in the relevant year cannot be subject to R&D and design deductions in the relevant year or in subsequent years will depend on the purpose for which the support is received.
For example, the depreciation amount of the support received from TUBITAK in 2023 to purchase depreciable economic assets to be used in project activities, the depreciation amount of this economic asset corresponding to 2023 will not be taken into account in the calculation of R&D and design discount for 2023 (The depreciation amount of the following years will also not be taken into account in the R&D and design discount of the following years). However, if a part of the purchased economic asset is financed by the enterprise, the depreciation amount corresponding to the financed part can be taken into account in the calculation of R&D and design deduction.
On the other hand, if the support is used to purchase economic assets to be used in the prototype of the project, since the expenditure to be made with this support is the first material and material expense, the entire support amount will not be taken into account in the calculation of R&D and design deduction in the relevant year. This expenditure, which is not taken into account in the deduction calculation, will be capitalized together with other expenditures made for the project, and if the project is successful, it will be amortized through depreciation, and if the project is unsuccessful, it will be directly expensed.
These explanations made above are shown below in the context of a sample application.
Example: (A) Ltd. Şti. received a grant from TÜBİTAK in 2023 regarding the project carried out in the R&D / Design Center;
- For an economic asset to be used in the project prototype: TL 500.000,
- For depreciable economic assets to be used in the project activity (useful life: 5 years): TL 500.000,
TL 1,000,000 in support.
On the other hand, it was observed that the following expenditures were made in 2023 for the activities carried out at the Center (To put it in simple terms
It is assumed that a project is carried out in the R&D/Design Center).
| Year 2023 | Amount (TL) |
| First Material and Supplies Expenses (a) (Includes the 500,000 TL amount of the prototype economic asset purchased with support from TÜBİTAK.) | 1,000,000 |
| Depreciations (b) (Includes the 100,000 TL depreciation calculated for the economic asset purchased with support from TÜBİTAK.) | 500,000 |
| Personnel Expenses (c) | 750,000 |
| General Expenses (d) | 250,000 |
| Externally Sourced Benefits and Services (e) | 300,000 |
| Taxes, Fees, and Charges (f) | 50,000 |
| 2023 Year Expenses to be Capitalized (g=a+b+c+d+e+f) | 2,850,000 |
| Amount Not Considered in R&D and Design Discount Due to Received Support (h=500,000+100,000) | 600,000 |
| R&D and Design Discount (ı=g-h) | 2,250,000 |
Accordingly, in the above example, TL 600.000 of the TL 1.000.000 support received from TUBITAK is not taken into account in the calculation of R&D and design deduction in 2023. The remaining TL 400.000 of the support will not be included in the R&D and design deduction in the following years.
Expenditures that cannot be taken into account in the R&D and design deduction due to the support will be capitalized in the year in which they are incurred and will be amortized through depreciation or directly written as expense according to the status of the project. In this example, 600.000 TL expenditure within the scope of the support was capitalized in 2023 and since the project has not yet been finalized as of the end of 2023, there is no amount to be amortized through depreciation or directly expensed.
On the other hand, the support of TL 1.000.000 will not be taken into account as income in determining the corporate income.
Sincerely,
BİLGENER
