Tax and Compliance — 13 min

Research and development tax incentives: A worldwide guide

Written by Ana Vieira

February 24, 2025

Link copied
to clipboard

One of the many benefits of hiring globally is that, if your business conducts research in any shape or form, you may be eligible for research and development (R&D) tax credits in the country — or countries — where your research-focused employees are based. This can be especially useful if your company is in a research-intensive industry, such as technology, engineering, or manufacturing.

But how do you know what you’re entitled to, and how do you claim?

In this guide, we’ll look at some of the most popular and generous R&D tax incentives across the globe, and explain their eligibility criteria.

Jump straight to a key chapter

What is an R&D tax incentive?
What R&D tax credits are available globally?
How can Remote help?

What is an R&D tax incentive?

An R&D tax incentive is a government program that encourages businesses to invest in research and development by offering tax relief on eligible expenses. These incentives can take various forms, such as tax credits, super deductions, grants, or payroll tax reductions, depending on the country.

By reducing the overall cost of innovation, these incentives help businesses develop new products, improve processes, and enhance technological capabilities. This, in turn, plays a crucial role for countries in fostering innovation, improving global competitiveness, and driving economic growth.

What expenses can you claim?

Most R&D tax incentives follow the OECD’s Frascati Manual definition of research and development, meaning eligible activities must involve systematic investigation, technological uncertainty, and a process of experimentation. Typical qualifying expenses include:

Wages for R&D employees
Materials used in experiments
Software development costs
Payments to third-party research institutions

The benefits of these incentives can be refundable or non-refundable, with some countries allowing businesses to carry forward unused credits to future tax years.

What R&D tax credits are available globally?

Many countries — especially those that are classed as innovation hubs or business-friendly economies — offer R&D tax incentives. Here are some of the most popular:

United States R&D tax credit

The US federal R&D tax credit is one of the most established and widely used incentives, offering tax relief for businesses investing in innovation. It is typically equal to 20% of incremental qualified research expenses (QREs), or 14% under the alternative simplified method (ASC). Eligible expenses include wages, supplies, contract research, and cloud computing costs related to R&D.

One key benefit is that small businesses and startups can apply the credit against payroll taxes if they have less than $5 million in gross receipts (and less than five years of revenue). While it is non-refundable, it can also be carried forward for up to 20 years. To claim the credit, your business must file IRS Form 6765 with its federal tax return.

link to How to claim the R&D tax credit in the US

Tax and Compliance —

6 min

How to claim the R&D tax credit in the US

The research and development (R&D) tax credit is a highly useful relief for many US businesses. Learn how to claim it in our in-depth guide.

It’s also important to note that many US states — such as California, Florida, and Georgia — offer state-level R&D tax credits that can be claimed alongside the federal one. To learn more, check out our in-depth guide on state R&D tax credits.

Canada R&D tax credit

Canada offers one of the most generous R&D tax incentive programs globally through its Scientific Research and Experimental Development (SR&ED) tax incentive, which provides refundable and non-refundable tax credits depending on your business size and structure.

For Canadian-controlled private corporations (CCPCs), the credit can be fully refundable at a rate of 35% on the first CAD 3 million in QREs and 15% on amounts above that. Other businesses, including foreign-controlled corporations, qualify for a 15% non-refundable credit.

Eligible expenditures include salaries, materials, overhead, and subcontractor costs related to R&D conducted in Canada. Unlike many countries, provincial R&D tax credits are also available, offering additional incentives depending on the province.

To claim the credit, your business must file Form T661 with the Canada Revenue Agency (CRA) along with its corporate tax return (T2).

United Kingdom R&D tax credit

In April 2024, the UK merged its previous R&D incentives schemes into a single system, simplifying the process for businesses. Under the new rules, all eligible companies can now claim a taxable credit worth 20% of qualifying R&D costs, which can be used to offset corporate tax liability. Loss-making SMEs with less than £20 million in annual expenditure may qualify for an enhanced relief of up to 27%.

Eligible expenses include staff salaries, subcontractor costs, software, materials, and utilities related to R&D activities. The UK also provides an additional incentive for R&D-intensive SMEs, offering a higher tax credit rate to companies spending more than 40% of total costs on R&D.

To claim the credit, your business must submit an R&D claim through its Corporation Tax return (CT600) and provide supporting documentation to HMRC.

Germany R&D tax credit

Under the Research Allowance Act (Forschungszulagengesetz - FZulG), Germany provides a taxable R&D allowance of 25% on eligible R&D expenses (up to a maximum annual benefit of €1 million per company). The credit is fully refundable, meaning businesses with no tax liability can receive a cash reimbursement.

Eligible expenses include wages for R&D employees, employer-paid social security contributions, and 60% of contract research costs. Unlike some countries, there is no requirement for an R&D project to be successful — only that it meets the definition of qualified research.

To apply, your business must first obtain project approval from the Bescheinigungsstelle Forschungszulage (BSFZ) before claiming the credit on your corporate tax return.

France R&D tax credit

France offers the Crédit d’Impôt Recherche (CIR), one of the most generous R&D tax incentives in Europe. The CIR provides a 30% tax credit on eligible R&D expenses up to €100 million, with a reduced rate of 5% for expenses exceeding this threshold. For small and new businesses, the credit is even refundable if not fully utilized.

Additionally, France offers the Crédit d’Impôt Innovation (CII), which grants a 20% credit (up to €80,000 per year) for SMEs developing new products.

Eligible expenses include wages for R&D staff, subcontracted research (within the EU or EEA), materials, and depreciation on R&D-related assets.

To claim the CIR or CII, your business must report qualifying expenses on its corporate tax return and, if requested, provide supporting documentation to the French tax authorities (DGFiP).

Australia R&D tax credit

Australia offers the R&D Tax Incentive (RDTI), which provides tax offsets to encourage innovation. The incentive is structured based on business size, as follows:

For companies with annual turnover below AUD 20 million, a refundable tax offset of 18.5% above the corporate tax rate (43.5% total for most small businesses).
For companies with annual turnover above AUD 20 million, a non-refundable offset of 8.5% or 16.5% above the corporate tax rate, depending on R&D intensity.

Eligible expenses include wages, contractor costs, software development, and R&D-related overheads. The credit is available to companies conducting R&D activities in Australia that involve experimentation and problem-solving to generate new knowledge.

To claim the RDTI, your business must first register its R&D activities with AusIndustry before lodging the claim with the Australian Taxation Office (ATO) through your company tax return.

Ireland R&D tax credit

Ireland offers an R&D tax credit of 25% on qualifying R&D expenses, which can be used to reduce your company’s corporation tax liability (or, if unused, be refunded over three years). Since 2024, the credit is fully refundable, making it particularly attractive for startups and companies without immediate tax liabilities.

Eligible costs include employee salaries, materials, software, and subcontracted research (up to 15% of total costs for domestic research and 5% for overseas research). Additionally, Ireland provides a Knowledge Development Box (KDB), allowing companies to benefit from a 6.25% corporate tax rate on profits derived from patented or R&D-driven intellectual property.

To claim the credit, your business must include the R&D tax claim in its Corporation Tax return (Form CT1) and submit supporting documentation if requested.

Netherlands R&D tax credit

The Netherlands R&D tax incentive program — known as the WBSO (Wet Bevordering Speur- en Ontwikkelingswerk) — provides a reduction in wage tax and social security contributions for businesses conducting R&D activities. Instead of a direct tax credit, companies benefit from lower payroll costs related to R&D employees.

Currently, the WBSO allows businesses to deduct 32% of the first €350,000 in eligible R&D wage costs, and 16% for amounts above that (note that startups can claim an enhanced rate of 40% on the first €350,000). Qualifying expenditures include R&D wages, prototypes, and software development costs.

To apply, your business must submit an advance application to the Netherlands Enterprise Agency (RVO) before carrying out R&D activities.

Singapore R&D tax credit

Singapore offers one of the most competitive R&D tax incentive programs globally, with enhanced tax deductions of up to 400% on qualifying R&D expenses under the Enterprise Innovation Scheme (EIS).

Until 2028, your business can claim:

400% tax deduction on the first SGD 400,000 of local R&D expenses
100% tax deduction on expenses exceeding this threshold

Eligible costs include employee salaries, consumables, software, and outsourced R&D conducted in Singapore. If your business has insufficient taxable income, a cash conversion option allows you to convert up to SGD 100,000 of deductions into a cash payout at 20%.

To claim the incentive, your business must include R&D expenses in its Corporate Income Tax Return (Form C) and submit supporting documentation to the Inland Revenue Authority of Singapore (IRAS) if requested.

Japan R&D tax credit

Japan offers an R&D tax credit ranging from 6% to 14% of eligible R&D expenses, with potential increases for companies engaging in collaborative or high-tech research. The credit is capped at 25% of total corporate tax liability, though additional incentives may apply for open innovation or cutting-edge technology development.

Eligible expenses include employee wages, contract research, and R&D-related materials and utilities. To claim the credit, your business must report qualifying R&D expenditures in its corporate tax return and maintain detailed supporting documentation for potential audits by Japan’s National Tax Agency (NTA).

South Korea R&D tax credit

South Korea offers a generous R&D tax credit ranging from 2% to 25% of your QREs, depending on your company’s size and R&D intensity. SMEs can claim up to 25%, while large corporations typically receive 2% to 10%. There is also a "Special R&D Tax Credit" for high-tech industries, which can further increase the benefit.

Eligible expenses include employee salaries, materials, subcontracted research, and prototype development. Additionally, South Korea offers a separate tax credit for R&D investments in national strategic technologies, such as semiconductors and biotechnology.

To claim the credit, your business must file R&D expenses in its corporate tax return with supporting documentation for review by the National Tax Service (NTS).

Brazil R&D tax credit

Brazil offers the Lei do Bem (Law of Good) R&D tax incentive, which provides a super deduction of 60% to 100% on eligible R&D expenses for companies operating under the Real Profit tax regime. This effectively reduces taxable income, lowering your corporate tax liability.

Eligible expenses include wages for R&D personnel, materials, software, and outsourced research. Companies that increase their R&D workforce or obtain patents can qualify for additional deductions of up to 20%. The incentive is non-refundable, but unused deductions can be carried forward.

To claim the benefit, your business must report qualifying R&D activities to the Ministry of Science, Technology, and Innovation (MCTI) and include the deductions in your corporate tax return.

India R&D tax credit

India offers an R&D tax deduction of 100% on eligible in-house R&D expenses under Section 35(2AB) of the Income Tax Act, applicable to companies engaged in manufacturing and biotechnology. Previously, a 150% "super deduction" was available, but this was reduced to 100% in 2020.

Eligible expenses include employee salaries, consumables, patents, and capital expenditures (excluding land and buildings). Note that the deduction is only available for R&D conducted in approved in-house R&D centers recognized by the Department of Scientific and Industrial Research (DSIR).

To claim the benefit, your business must obtain DSIR approval, maintain proper R&D documentation, and report the deduction in your corporate tax return.

Israel R&D tax credit

Israel offers R&D tax incentives primarily through grants and tax reductions, rather than traditional tax credits. The Israel Innovation Authority (IIA) provides grants covering 20% to 50% of eligible R&D expenses, with higher rates available for projects in priority sectors or less developed regions. Companies receiving grants must repay them as royalties if the R&D leads to commercialized products.

For tax purposes, Israel allows a 100% deduction on R&D expenses in the year they are incurred, provided the research is conducted within Israel and aims to develop new products or technologies. Additionally, companies classified as Preferred Technology Enterprises may qualify for a reduced corporate tax rate of 7.5% to 12%.

To claim the benefit, your business must apply for IIA approval for grants or report eligible R&D expenses in its corporate tax return with supporting documentation.

South Africa R&D tax credit

South Africa offers a 150% super deduction on eligible R&D expenses, allowing businesses to deduct 1.5 times the actual R&D costs from their taxable income. This incentive applies to R&D activities conducted within South Africa and is available to companies across all industries, provided the research involves systematic investigative or experimental activities leading to new or improved products, processes, or knowledge.

Eligible expenses include salaries of R&D employees, materials, software, and prototype development. The deduction is non-refundable, but unused deductions can be carried forward.

To qualify, your business must obtain pre-approval from the Department of Science and Innovation (DSI) before claiming the deduction in your corporate tax return.

How can Remote help?

If your business engages in any kind of innovative research, claiming R&D tax credits can potentially provide a major financial advantage. And if you have team members in countries that are not on this list but they’re conducting research activities, it’s definitely worth doing your research.

However, to make the process efficient and simple, you need to keep full track of the compensation you’re paying to the employees who are contributing to your research activities.

As a fully automated global payroll system, Remote Payroll can provide you with this information quickly and accurately, making it more simple to calculate your eligible costs. Our system also enables your people to track their hours, improving the accuracy and validity of your claims.

To learn more about how we can help — and how we can simplify your entire payroll management system, wherever your people are based — speak to one of our friendly experts today.