Ten years of the SkatteFUNN Tax Incentive Scheme

Under the SkatteFUNN scheme, business enterprises are eligible for tax deductions of 18–20 per cent on approved expenses associated with research and development (R&D). The requirements are simple: a project must have as its objective to generate new knowledge or acquire new skills in connection with the development of new or improved products, services or production processes.

Knowledge – the most powerful driver behind innovation

The SkatteFUNN scheme motivates companies to think systematically about competence-building. The knowledge content of Norwegian goods and services needs to improve year after year in order to ensure competitiveness in the business sector. Greater understanding and better utilisation of new knowledge and technology are the most powerful drivers behind innovation.

At this point in time, industry in Norway represents less than half of the overall national research investment. In Sweden, the comparable figure is much higher, at roughly 70 per cent. This gap can primarily be attributed to the fact that Sweden has large global concerns in industries where a large proportion of the revenues are channelled into research.

Photo: Shutterstock The roughly 21 000 projects that have been approved since the start-up of SkatteFUNN ten years ago represent a combined cost of NOK 48.5 billion and the companies have qualified for tax deductions of NOK 9.5 billion altogether. (Photo: Shutterstock)

While research is no less important for Norwegian industry – for Statoil as an example - the amount allotted for investment in research is typically a smaller percentage of revenue. Quality schemes that promote increased investment in knowledge across a broad playing field – such as SkatteFUNN - are of vital importance in order to change this.

Tax deductions totalling 9.5 billion

The SkatteFUNN scheme has been a considerable success and is becoming increasingly more popular among Norwegian companies.

The roughly 21 000 projects that have been approved since the scheme’s start-up ten years ago represent a combined cost of NOK 48.5 billion and the companies have qualified for tax deductions of NOK 9.5 billion altogether.

ICT comprises the largest sector under the scheme, representing 19 per cent of the total tax deduction. This corresponds closely to the general figures for overall R&D activity among Norwegian businesses.

Simplified application process

In 2011, approximately one-third of the applications received were submitted by companies that had not previously applied to the SkatteFUNN scheme. This shows that the number of businesses who see the value of the scheme in strengthening their R&D efforts is on the rise.

Photo: Jan Christian Sørlie PROFITABLE: Evaluations that have been conducted show that investment in research and development is profitable, says Arvid Hallén, Director General of the Research Council. (Photo: Jan Christian Sørlie)

The total number of projects, however, has not increased over the past years. This may imply that the right level has been reached relative to the amount of activity taking place, or it could mean that more work is needed to make the advantages of SkatteFUNN scheme more evident. A simplified application process and a more targeted application form are measures introduced to attract even more businesses.

Long-term and varied approach to innovation

The SkatteFUNN scheme is one of a set of public funding instruments established to enhance the innovative capacity of Norwegian trade and industry.

Some of the instruments are directed towards strengthening the knowledge base being developed at universities and research institutes. This can be achieved by means of subject-neutral calls for proposal or through competence-building initiatives in specific sectors or technological fields. Other instruments are oriented towards partial funding of projects that businesses initiate on their own.

Evaluations that have been conducted show that investment in research and development pays off, whether it leads to new products or services or builds expertise and networks that become valuable elements in a long-term innovation effort.

The SkatteFUNN Tax Incentive Scheme
  • The SkatteFUNN scheme is a rights-based tax relief scheme available to all industries and types of businesses, and is designed to promote research and development activity;
  • The companies themselves choose the topics for their project;
  • Projects must be approved by the Research Council before the company can claim a tax deduction for project-associated costs;
  • Small and medium-sized enterprises may be granted a deduction of 20 per cent of associated project costs while large enterprises may receive 18 per cent.

www.skattefunn.no

 

From Forskning magazine no. 3/2012

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