R&D Tax Credits Can Help Businesses Win with Innovation

Written by Corporate Tax Incentives. Updated Jun 10, 2019.

RD_Worldwide1. South Korea, 2. Germany, 3. Finland, 4. Switzerland,
5. Israel, 6. Singapore, 7. Sweden, 8. U.S., 9. Japan, 10. France

Curious about this list? Could it be the top ten countries with the most registered cell phones? The countries that consume the most sea bass? Perhaps those with the largest population of professional chess players? Nope.

This top ten list presents the world’s most innovative countries, according to the 2019 Bloomberg Innovation Index. For seven years the index has analyzed scores of criteria – including research and development spending and manufacturing capabilities – to rank countries across the globe based on their innovative economies.

Marathon for Modernization

Six-year reigning winner, South Korea, narrowly clung to its number one rank through liberal investments in creative technologies, plus a startup-friendly regulatory program. Germany’s energetic manufacturing and research bumped up against the tiny country with a cozy second slot.

Learn More about Decreasing Small Business Tax Liability with the R&D Tax Credit

Zealous patent action hoisted Israel from tenth to fifth, looming above Singapore, Sweden, the U.S., Japan, and France. Sweden plunged to its number seventh spot from number two in 2018.

Picking Up the Pace

Many countries – large and small - are vigorously pursuing innovation. This is further evidenced by R&D Magazine’s 2019 Global R&D Funding Forecast prediction: global research and development (R&D) spending in 2019 will swell by 3.6 percent for a total of $2.3 trillion. This tally represents more than 110 countries with at least $100 million in R&D investments.

Research and development lay the foundation of innovation. Without it, new approaches, products, and processes cannot be discovered, tested, and perfected.

Don’t Forget to Stop and Take Your Tax Credits

But while organizations in these countries are busy searching for the next ingenious invention or improvement and toiling away on all things R&D - developing, experimenting, testing, etc. - they might be overlooking valuable tax incentives that their government makes available to spur innovation and growth.

In the U.S., Congress looks to help American companies remain competitive by way of the Federal Credit for Increasing Research Activities, also known as the R&D Tax Credit. This incentive can provide a dollar-for-dollar reduction in a company’s federal tax liability. Thus, the money recovered from these captured credits can help offset a business’ R&D expenses.

Everyone Gets to Play

And the research and development tax credit is available to any size U.S. business, in any industry for inventing, designing, developing, or improving products, process, techniques, formulas, and software.

Many people hold a narrow view of research and development, thinking only hi-tech, software, or life science sectors participate in R&D. But in reality, a farmer can reap bountiful credit savings from activities dedicated to improving his irrigation process or developing a healthier diet for his livestock.

Ready, Set…Research!

Take a look at this small sampling of R&D activities that qualify for the federal credit:

  • Designing, developing, and improving new and existing products
  • Developing new or improved technology, processes, and procedures
  • Developing new or improved quality assurance testing processes
  • Developing or implementing automated processes
  • Development of new software applications
  • Development of unique, energy-efficient features
  • Examining component defects or failures to improve product quality
  • Manufacturing, evaluating, and testing samples and prototypes
  • Testing new or existing components to evaluate performance

Nearing the Finish Line

The R&D tax credit is a dynamic opportunity for any business – large or small, startup or established – in any industry, to recover cash that can power their innovative efforts and their business as a whole.

And the best way to navigate the path to the ultimate tax savings is to partner with a tax consultant.



What Can R&D Do For You?  Discover a practical approach to maximizing your federal research and  development tax credit. Download Guide

Topics: R&D Tax Credit

Corporate Tax Incentives

Written by Corporate Tax Incentives

CTI is a tax incentives specialty firm that secures greater tax credits for businesses with our proven project methodology and unparalleled personalized service. For almost 20 years, our elite tax professionals have proactively engaged clients to deliver unmatched value with transparency and efficiency thorough secure in-house software, comprehensive audit-ready deliverables, and 24x7 access to real-time dashboards. We are tax consultancy experts passionate about maximizing credits and incentives for powering the success of your business.