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Aid for research and development

Aid for research and development may be sought by legal entities – entrepreneurs – and such aid is provided from the Slovak budget. In addition, the applicant may also apply for a subsidy for research and development from the funds of the European Union. Hereto we analyse the situation where an applicant applies for aid from the Slovak national budget.

If a foreign investor is to be considered for such aid, the investor must first become incorporated in Slovakia. Aid is intended to mean a financial subsidy or corporate income tax allowance. Each specific applicant must prove whether they are applying for the specific grant as a) a micro-business b) small business c) medium business or d) large business. This qualification is vital for determining the minimum amount of the company's own investment into the project.

1) Projects involving basic research are focused on experimental or theoretic work regardless of the possibility of applying any direct practical results. The micro and small businesses are required to incur at least €0.25 million ($319,811), medium businesses 0.5 and large enterprises at least €1 million of investment. Irrespective of the size, the maximum percentage of claim for repayment of investment is 100% (eg all costs are repayable); however, the maximal amount of aid for the applicant's project is €20 million.

2) Projects of applied research are focused on obtaining new knowledge and skills for the development of new products, processes or services with the goal of direct use of such results in economic and/or social practice. Hereto (i) at least €1.5 million is to be invested by the micro/small businesses; (ii) €2.5 million by the medium businesses; and (iii) €3.5 million by the large enterprises. Further, the maximal percentage of claim for repayment of investment depends on the size of the business, while (i) the micro/small business can apply for reimbursement of 70% of their investment costs; (ii) medium businesses are entitled to receive 60%; and (iii) large enterprises 50% of their investment expenditure. The amount of aid may be increased if the project includes effective co-operation between at least two independent businesses. Regardless of the size, one project can receive €10 million at maximum.

3) Projects of experimental development are focused on obtaining, combining, forming and using existing scientific, technological, commercial or other relevant knowledge and skills in order to create plans or draft plans of new, updated or improved products, processes or services. The minimal threshold of investment is set to: (i) €1.5 million for the micro/small businesses; (ii) € 2.5 million for the medium; and (iii) €3.5 million for the large enterprises. The maximal percentage of claim for the repayment of investments incurred is as follows: (i) 45% for the micro/small businesses; 35% for the medium; and (iii) 25 % for the large enterprises. The amount of aid may be increased if the project includes effective co-operation between at least two independent businesses. One project may be supported with €7.5 million of aid at most.

4) Studies of technical feasibility are studies focused on verifying the feasibility of a project of applied research or for verifying the probability and feasibility of a project of experimental development. The maximal amount of aid for drawing up studies for industrial research and experimental development is €7.5 million. The amount of aid (ie incentives expressed as % of the investment) is:

a) micro, small and medium businesses: 75% of legitimate costs for studies in industrial research and 50% for studies in experimental development;

b) large businesses: 65% of legitimate costs for studies in industrial research and 40% for studies in experimental development;

5) Projects for protecting industrial property aimed at ensuring the protection of results learned by a project of applied research or experimental development by way of patented protection or other form of protection of industrial property rights. The maximal aid cannot exceed the maximum amount for applicable research and development activities which led to the creation of products subject to industrial property rights. The maximal amount of aid for micro, small and medium businesses cannot exceed €5 million.

6) Projects for temporary assignment of highly-qualified employees, meaning highly-qualified employees who are temporarily assigned to the business, such as researchers, engineers, designers or marketing managers with post-graduate degrees and more than five years of relevant work experience. The amount of the aid (% of investment) may not exceed 50% of the investment costs for the temporary assignment of such employees for a period not to exceed three years.

The terms for drawing the incentives are comprised mainly of the creation of a new workplace or expansion of an existing workplace focused on research and development. An additional term is the performance of a supporting activity for research and development for a period of at least five years after the incentives have been granted. Work on the project cannot commence prior to lodging the proper applications.

Marian Dzuroska and Daniel Futej

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