Forsøgs- og forskningsvirksomhed i relation til software

Abstract

The purpose of this thesis is to investigate to what extent costs for software development can be considered as research and development costs for tax purposes according to the Danish Tax Assessment Act § 8 B. The motivation for investigating this topic is due to the favorable tax regime derived from such costs, such as extra tax deductions in the taxable income and the opportunity for taxpayers to apply for tax credits. The thesis contains an explanation of software development and the different stages in the
development process for software, which is followed by an exposition of the treatment of research and development costs for tax purposes and accounting purposes. Based on this exposition, this paper discusses different general topics regarding research and development costs for tax purposes and specific topics concerning software development. The general topics include discussions of the relation between the general cost deduction principle in Danish tax law and the definition of research and development costs in the Danish Tax Assessment Act § 8 B. Afterwards, it is investigated if the OECD Frascati Manual can be used in the law interpretation, and on what basis the research and development activities must be compared to. The specific topics include a discussion of software and to what extent software development can be considered as research and development for tax purposes. At last, the basis for the criteria “technological or scientific leap” stated in Danish tax case law is discussed, and it will be analyzed when the criteria is used in practice. It is concluded that the Danish Tax assessment Act § 8 B has an independent and autonomous scope, and is not in any way limited or prohibited by the common tax deduction rule for operating expenses, and that there is no legal basis for using the Frascati Manual in the law interpretation of the Danish Tax Assessment Act § 8 B. Furthermore, based on Danish case law, the basis of comparison for the research and development costs according to the Danish Tax Assessment Act § 8 B must be based on the general level of knowledge and usage of the technology in the society. It is concluded, that based on the Danish case law, it is difficult to deduce clear guidance stating when software can be subject to the preferential tax regime under the Danish Tax Assessment Act § 8 B. It seems, that the National Tax Tribunal mainly exercises an overall assessment of the software, where the invested amounts and complexity of the software are emphasized in the law interpretation. At last, it is concluded that the criteria “technological or scientific leap” used by the National Tax Tribunal in software cases is to a higher degree expressed as a tightening of the taxpayer’s burden of proof rather than an actual condition, which needs to be met according to the Danish Tax Assessment Act § 8 B.