How to turn R&D investment into an effective corporate income tax rate close to zero

Investing in research and development does not have to be a financial burden; when well planned, the R&D effort frees up vital resources for growth.

Investing in research and development (R&D) is perceived by companies as an additional cost, but when well structured and planned, the R&D effort can be transformed into an effective tax optimisation instrument, freeing up financial resources to reinvest in the company's growth and innovation.

What really defines R&D?

To make the most of this benefit, it is important to understand what R&D really is, since not all technological or innovation initiatives developed by a company fall into this category. A few examples help to clarify:

• R&D projects: projects aimed at developing new products, processes, or services that include the presence of a relevant element of novelty and the resolution of a scientific and/or technological uncertainty. It strictly requires the creation of new knowledge, not available internationally. Examples: developing a product using new materials, developing equipment with complex functionalities, developing a new drug.
• Engineering projects: projects focusing on the implementation of already known solutions or the improvement and optimisation of existing processes without generating new knowledge. Examples: optimising the efficiency of a production line using standard technologies, installing more efficient and automated equipment.
• Operational development: this category covers maintenance, adaptation, or reorganisation activities of the business which, although vital, do not involve any scientific or technological innovation component. E.g.: reorganisation of procedures, maintenance, and updating activities.

It is important to note that some improvements can be classified as R&D activities when they involve profound changes and the resolution of technical uncertainties. Keeping a detailed record of the work carried out, including the description of the objectives, the degree of novelty, the nature of the technical uncertainties, and the methodology applied, is essential to be able to assess and justify the project's eligibility at a later stage.

How the support works: SIFIDE rates

This mechanism was created to encourage companies to progressively increase their investment in R&D. By applying an incremental rate to the growth of eligible expenses compared to the historical average, SIFIDE seeks to stimulate continuous growth in companies' R&D activities, promoting greater innovation, competitiveness, and knowledge creation in the business fabric.

The value of the tax benefit must be deducted in full from the tax payable for the year. If the company does not have sufficient tax liability to fully use the calculated deduction, the remaining amount can be used up to the 12th subsequent taxation period.

The importance of multi-year planning

To maximise these effects, SIFIDE should be seen as part of multi-year planning. By planning R&D projects over a multi-year horizon, the company can:

• Better structure technical and financial documentation.
• Manage the pace of investment to optimise the effect of the incremental rate.
• Anticipate the tax and treasury impact, avoiding surprises.

In practice, this means aligning the innovation pipeline with the tax calendar, treating the R&D and tax strategy as integrated parts of the same business decision.

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Last updated: 18/03/2026