Slovakia Corporate R&D Report 2014 - Deloitte US · Slovakia Corporate R&D Report 2014 3 ... for research and technological development / Horizon 2020) EU co-ﬁnanced R&D grants

SlovakiaCorporate R&D Report2014

July 2014

2

3Slovakia Corporate R&D Report 2014

The Slovak government aims to increase R&D spending in the economy to at least 1% of GDP by 2020. Reacting to the demand of companies for new R&D incentives tools, it has expressed its intention of getting more involved in the race to attract R&D spending. One new measure under consideration is to enable companies to deduct an extra 25% of eligible R&D expenses from their corporate income tax base. The results of this year’s R&D survey show that while companies welcome such an addition to the R&D support toolbox, which is expected to come into force in 2015, it is crucial that this proposed measure is set up in such a way that its practical implementation yields the desired result of increased R&D spending.

I hope that you find this report insightful and useful.

Martin RybárDirectorGovernment Incentives and R&DDeloitte Slovakia

Thank you for taking the time to read our Corporate R&D Report 2014. Just as last year, Deloitte and SARIO have carried out a survey of companies that operate in Slovakia on the subject of R&D.

Government support for R&D in Slovakia has been viewed as limited and insufficiently used by the coun-try’s companies. In addition, the initiatives taken by the Slovak government to increase R&D spending have been restricted, unlike in other European coun-tries which have been introducing attractive grant and R&D incentive schemes. As a result, Slovakia is lagging behind in the ever-intensifying competition to “host” the R&D headquarters of multinational companies.

Foreword

4

Key trends:

•OvertwothirdsofrespondentsexpecttoincreasetheirR&Dexpenditureinthe nextthreetofiveyears

•The rangeofavailabletypesofbenefitsandaccesstoskilledpersonnelwerethe mostimportantexternalfactorsindrivingincreasedR&Dspending

•Respondentswidelyuseandaremorefamiliarwithcashgrantsthanwithtaxincentives,the mainreasonbeinguncertaintyregardingthe taxauthority’sapproachtoandassessmentofcertainR&Dactivities

•Almost80%ofrespondentscollaboratewiththirdpartieswhilecarryingoutR&Dprojects.


Spending on R&D

The survey targeted companies that are active in R&D. As a result, over half of the respondents (55%) indicated that they spend more than 10% of their turnover on R&D.

The majority of these were from the manufac-turing sector, followed by energy and IT and telecommunications.

Most companies plan to keep their R&D spending on at least the same level as in 2013 in the short term (one to two years). Over the longer horizon of three to five years, the majority of respondents intend to increase their R&D spending.

This intention to spend more on R&D in the longer term is a positive development since last year’s R&D survey, when companies reported they were not planning to increase their R&D spending should the regulatory environment remain unchanged. The identified change of heart might have been

influenced by the fact that legislation is waiting to be passed that proposes an additional deduction of 25% of eligible R&D expenses from the company’s corporate income tax base as of 2015 (i.e. the first claims will be made in 2015 for the 2014 tax year). The expressed intention of the government to support R&D is positively correlated to the private sector’s attitude towards R&D spending. However, it is clear from the responses that R&D spending is only likely to increase once this change in regulation is actually in effect.

Findings

What percentage of your turnover was spent on R&D last year?

I do not know

>10%

5-10%

3-5%

1-3%

<1%

External cooperation

R&D organizational structure

IP protection policy

Existence of R&D procedures

R&D financing

R&D portfolio management

Human capital management focusedon retaining most valuable people

0%

10%

20%

30%

40%

50%

60%

70%

Higher thanin 2013

Approximatelythe same as in 2013

Lower comparedto 2013

0% 10% 20% 30% 40% 50% 60% 70%

None

Industrial design

Trademark

Copyright

Patents/utility design

Company secrets policy

Other factors

Access to the R&D sectoral benchmarks

Stability of the regulatory environment

Protection of intellectual property rights

Possibility of co-financing costs of IP protection procedures

Access to and cooperation with universities/research institutes

More R&D tax incentives compared to R&D cash grants

Availability of more types of benefits (cash grant, tax allowance, etc.)

Costs of researchers

More R&D cash grants compared to R&D tax incentives

Availability of experienced researchers

Availability of skilled researchers

0% 10% 20% 30% 40% 50% 60% 70% 80%

Slovak Income tax relief relatingto the investment incentives for R&D centers

Slovak Income tax relief relatingto the stimuli for R&D activities

Subsidies for acquisition of tangible and intangible assetsrelating to the investment incentives for R&D centers

Contribution for the creation of a new job relatingto the investment incentives for R&D centers

Transfer of immovable property or exchangeof immovable property at a price

lower than a general asset value incentives for R&D centers

R&D grants directly provided from Brussels(e.g. the EU 7th Framework Programme

for research and technological development / Horizon 2020)

EU co-financed R&D grants (EU Structural funds:Slovak Innovation and Energy Agency; Agency of the Slovak Republic Ministry

of Education for the EU Structural funds)

Slovak national R&D grants (e.g. calls for applicationsby the Slovak Research and Development Agency)

Other

Private R&D /scientific institutes

Public R&D /scientific institutes

Universities /Academies of Science

It is required in orderto receive higher cash grantfor conducting an R&D project

It is requiredto apply for grant

It is neededfor conducting outresearch projects

6%

15%

9%

0%

55%

12%

2%

18%

12%

9%

47%

12%

2013 2014

How would you foresee the R&D spending of your company in the next few years, compared to 2013?

I do not know

>10%

5-10%

3-5%

1-3%

<1%





R&D financing



0%

10%

20%

30%

40%

50%

60%

70%

Higher thanin 2013



0% 10% 20% 30% 40% 50% 60% 70%

None

Industrial design

Trademark

Copyright



Other factors












0% 10% 20% 30% 40% 50% 60% 70% 80%












Other







6%3%

55%

27%

33%

67%

1 – 2 years

3 – 5 years

6

R&D Policy

A company’s R&D policy is a set of internal rules and strategies defining its attitude to R&D. Investments in R&D are often capital-intensive and carry a high risk, as the outcome of a project is often not clear at the beginning. Nevertheless, that risk is outweighed by the benefit should the R&D project be a success. Companies may gain competitive advantage by carrying out R&D activities, whether in terms of raising revenues from new product development or cost savings from energy-efficiency research projects. Non-innovative companies often fall into decline once their products are “milked out” and become obsolete.

The R&D policy of a company is not only limited by the available capital for such investments, but can also be affected by other factors, such as the availability and retention of a skilled workforce, the scale of and confidence in the company’s ability to protect its intellectual property, or its co-operation with external parties on its R&D projects.

Respondents were asked to rate different aspects of their firms’ R&D policies. Three factors stood out as the most important:

• Human capital management, focused on retaining the most valuable people

• R&D portfolio management (i.e. prioritisation and resource allocation for R&D projects)

• R&D financing.

While seen as important, other factors such as the organisational structure of R&D functions and external co-operation were not felt to be critical.

Please rate the importance of the following aspects of your firm’s R&D policy (on a scale from 0 to 3)

I do not know

>10%

5-10%

3-5%

1-3%

<1%





R&D financing



0%

10%

20%

30%

40%

50%

60%

70%

Higher thanin 2013



0% 10% 20% 30% 40% 50% 60% 70%

None

Industrial design

Trademark

Copyright



Other factors












0% 10% 20% 30% 40% 50% 60% 70% 80%












Other







2.36

2.30

2.24

1.73

1.69

1.67

1.58


Companies employ various schemes to protect their intellectual property. The company secrecy policy, patents and utility design were mentioned most often.

There were differences by industry – IT media and telecoms are more reliant on copyright protection, whereas manufacturing companies more commonly utilise patents and utility design.

How do you protect intellectual property / know-how in your company?

I do not know

>10%

5-10%

3-5%

1-3%

<1%





R&D financing



0%

10%

20%

30%

40%

50%

60%

70%

Higher thanin 2013



0% 10% 20% 30% 40% 50% 60% 70%

None

Industrial design

Trademark

Copyright



Other factors












0% 10% 20% 30% 40% 50% 60% 70% 80%












Other







64%

58%

39%

30%

18%

3%

8

Factors influencing R&D spending

Many external factors influence a company’s decision about whether and how much to spend on R&D. As in last year, the most important of these are connected to human resources – the availability of skilled and experienced researchers and their cost. The next area of importance is the availability of more types of finan-cial benefits. Respondents showed a slight preference for R&D cash grants over tax incentives.

Respondents mentioned other specific factors as well, including a perceived preference for, and advantage to, foreign R&D investments rather than local compa-nies and undertakings.

The proposed tax credit measure, relating to the addi-tional deduction of eligible R&D costs is more than just a means of increasing demand for more R&D-related benefits.

Companies may also be encouraged to invest the resources they save as a result into training the people who work on R&D projects, so also addressing the perceived major issue about the avail-ability and cost of skilled researchers.

To what extent would the external factors below bring about an increase in your R&D spending in the next one to two years? (on a scale from 0 to 3)

I do not know

>10%

5-10%

3-5%

1-3%

<1%





R&D financing



0%

10%

20%

30%

40%

50%

60%

70%

Higher thanin 2013



0% 10% 20% 30% 40% 50% 60% 70%

None

Industrial design

Trademark

Copyright



Other factors












0% 10% 20% 30% 40% 50% 60% 70% 80%












Other







2.33

2.36

2.15

2.12

2.06

1.73

1.64

1.48

1.42

1.38

1.33

0.56


R&D grants and tax incentives

The survey explores how familiar companies are with the most important government benefits (cash grant schemes and R&D tax incentives).

In general, the trends remain the same as in last year’s survey - EU co-financed R&D grants and Slovak national R&D grants are still the most widely known and used, while there has been a decline in both knowledge and use of other available grant tools. Tax incentives remain significantly less familiar and used.

Around a third (30%) of respondents believe they do not carry out R&D activities that would be eligible for R&D tax incentives. Many claim to be unfamiliar with the current tax incentive schemes. Even when they are familiar with them, they perceive several risks when considering these tools:

• 27% believe that R&D tax regulations are not clear and present too many risks for the company

• 24% are uncertain about the approach of the tax authority with respect to R&D costs

• 15% are unsure about which activities could be classified as R&D and how to prove that its activi-ties do comprise R&D.

The survey results indicate that companies have a lot on their plates with regard to uncertainty about the outcomes of their individual R&D projects. Any uncertainty regarding the eligibility, aid intensity and outcomes of the approval of R&D incentives is adding to the risks associated with R&D. In that sense, it is not encouraging companies to pursue R&D investments. The contemplated new tax credit scheme, which will enable companies to deduct an additional 25% of eligible R&D costs from their corporate income tax base, is designed to enable clear and transparent evaluation. A uniform treatment in respect to aid intensity could be a solution to the issue at hand. However, the planned intensity of the aid may not be a sufficient motivation to encourage companies to increase their R&D spending.

10

I do not know

>10%

5-10%

3-5%

1-3%

<1%





R&D financing



0%

10%

20%

30%

40%

50%

60%

70%

Higher thanin 2013



0% 10% 20% 30% 40% 50% 60% 70%

None

Industrial design

Trademark

Copyright



Other factors












0% 10% 20% 30% 40% 50% 60% 70% 80%












Other







Which grants and tax incentives are you familiar with and which ones have you used?

70%

48%

76%

45%

61%

33%

6%

0%

0%

27%

9%

27%

18%

6%

27%

3%

Familiar with

Used


Collaboration with third parties

Almost 80% of the survey respondents work with third parties on R&D projects. This is most commonly because collaboration is needed to carry out a research project or because it is required for grant-eligibility purposes.

62% of those who collaborate do so with universities, 31% with public scientific institutions and 23% with private scientific institutions.

The main reasons for non-collaboration is that companies’ R&D needs are satisfied through their own R&D centres, either in Slovakia or abroad.

Do you collaborate with third parties when carrying out R&D projects?

Why yes? With whom?

I do not know

>10%

5-10%

3-5%

1-3%

<1%





R&D financing



0%

10%

20%

30%

40%

50%

60%

70%

Higher thanin 2013



0% 10% 20% 30% 40% 50% 60% 70%

None

Industrial design

Trademark

Copyright



Other factors












0% 10% 20% 30% 40% 50% 60% 70% 80%












Other







I do not know

>10%

5-10%

3-5%

1-3%

<1%





R&D financing



0%

10%

20%

30%

40%

50%

60%

70%

Higher thanin 2013



0% 10% 20% 30% 40% 50% 60% 70%

None

Industrial design

Trademark

Copyright



Other factors












0% 10% 20% 30% 40% 50% 60% 70% 80%












Other







21%

79%

62%

31%

23%

15%

77%

23%

23%

No

Yes

12

Regionalperspective


The European Commission’s Innovation Union Scoreboard 2014 shows that among countries taking part in the survey, only Estonia is ranked in the group of so-called innovation followers (those whose innovation performance is close to or above the EU average). Croatia, the Czech Republic, Hungary, Lithuania, Poland and Slovakia are among the moderate innovators with performance below the EU average, while Bulgaria, Latvia and Romania are rated as modest innovators (innovation performance well below the EU average).

Innovation-wise we all are looking in the same direction. However, a differentiated approach to supporting R&D is apparent across the region. As the findings of last year’s survey showed, the R&D activities of companies vary across the region and different factors are influencing increase of spending on R&D. Much is however to be learnt and shared – this is one of main reasons for covering additional countries in this year’s survey, gathering data from 10 countries in the region. This brings us the opportunity to compare how countries stimulate R&D activities, how implemented systems are evaluated by enterprises and how this impacts the effectiveness of various systems.

Supplementary to the on-line survey, we have conducted detailed interviews with representatives of some of the best-known R&D developers in the region. Key quotes from these interviews provide a valuable complement to the survey conclusions presented in the report.

I very much hope that you find this report an interesting and insightful read.

Magdalena Burnat-MikoszPartnerCentral European Leader for Deloitte R&D and Government Incentives Service Line

Central European countries are in the process of transforming into knowledge–based economies. They can no longer compete with low-cost labour on the global market. This has already been acknowledged by Asian countries, whose share in global spending on R&D is still rising – from 33% in 2009 to nearly 40% in 2014 (and China’s from 10% to nearly 18%). In the meanwhile Europe is decreasing its participation – down from 26% of the total in 2009 to 22% in 20141.

After political changes, countries in the region have begun their transformation from a similar level although currently they are at different stages of development.

Partner’sForeword

1 2014 Global R&D Funding Forecast by Battelle and R&D Magazine

14

Keytrendsandfindings:

• Availabilityofmoretypesofincentivesisstillthe mostimportantfactoraffectingthe levelofexpenditureonR&D.Resultsofthe surveyshowthatcashgrantsareonlya slightlymorefrequentlyexpectedincentivethantaxreliefs–a mixedsystem,combiningthesetwoschemes,isperceivedasthe mosteffectivewaytosupportcompanies’R&Dactivities.Inordertomaintainthe presentrisingtrendofcompanies’shareinR&Dexpenditure,itisessentialtoadjustthe supportschemesavailableinCentralEuropetomatchenterpriseexpectations2.

• PredictedpercentageofR&Dexpendituresisdecliningoverall–morecompaniesareallocatinglessthan1%andunder3%oftheirturnovertoR&D,whilethoseallocatingover10%havedeclinedfrom24%to22.1%ofthe sample.Asindicatedabove,the availabilityofincentivesstronglyinfluencesR&Dspending;thismeansslightlypessimisticforecastsregardingshort-termR&Dspendingmayresultfromongoingworkonsupportschemesunderthe EU2014-2020agendaandlimitedavailabilityofgrants.

• Increasingnumbersofcompaniesarecollaboratingwithresearchunits,indicatinga trendtowardsstrengtheningco-operationbetweenbusinessandscience.The proportionofcompanieswiththeirownR&Dcentreisalsogrowing,andthisresultsinthe factthatthe availabilityofskilledandexperiencedresearchersisoneofthe mostimportantfactorsinfluencingR&Dexpenditure.However,the possibilityofco-operatingwithuniversities/researchinstitutesisstillhighlyappreciatedanddesirableinR&Dactivities.

2 In 2011 BERD (Business Expenditures on R&D) index value for Europe Union was 54.9% and only Estonia had this index value above the average (55%). The lowest index was in Bulgaria (16.9%), Latvia (24.8%), Poland (28.1%) and Lithuania (28.2%) – Eurostat


• Wecanseea numberofchangesinhowcompaniesdefineR&DandtheirR&Dactivities.Whilethe proportionoffirmsin2014definingR&D as changes / improvements of existing products / processes / services leading to better performance / characteristics of products / processes / services hasfallenfrom67%to65.2%,thisselectionhasalsomovedupfromthirdtofirstplace.The leadingdefinitionin2013(Development of new products / processes / services)hasfallenfrom88%to60%,whilethe thirdmostpopulardefinitionisjoint realisation of research projects aimed at improvement or development of new products/processes/services with other capital group entities/companies.(Itrisesfromfourthtothirddespitea reductioninsupportfrom49%to29.4%).ClearandtransparentunderstandingofR&Disbeingunderlinedbyfirmsinthe regionasimportantfactorforallsupportschemes.

• IP/know-howareprotectedusuallyinthe formofa companysecretspolicyandtrademarks.However,companiesdeclarethatthe mosteffectivewayistocombinedifferentformsofprotectionandtailorthemtothe specificneedsofdifferentsectors.

16

Definition of companies’ R&D activities

Within last year’s survey, respondents were asked to define their understanding of R&D. This year, we invited them to describe their R&D activities – and there have been some major changes in their answers. In the 2014 report, 65.2% of companies across the region defined R&D activity as making Changes / improvements to existing products / processes / services, leading to better performance / characteris-tics of products / processes / services. This was a small decline comparing to 2013’s 67%, but despite this the definition has moved up from number three to the number one choice. Its new popularity was driven up by above average selection in Estonia (87.5%) and Romania (78.6%).

In the 2013 report, the leading definition of choice was the Development of new products / processes / services, chosen by 88% of respondents. In 2014, this has slipped to 60%, although it attracted 75% of respondents in Lithuania.

2014’s third most popular definition, with 29.4%, is the Joint realisation of research projects aimed at improvement or development of new products / processes / services with other capital group entities / companies. In the 2013 report, this was number four with 49%. This year, it was driven up by above average scores in Romania (over 46%) and Estonia (over 37%).

Perhaps the most significant change in the definition of R&D activities appeared within the Co-operation with external entities by means of purchasing R&D services/IP/know-how. This has been observed particularly among Polish respondents – last year, 68% declared that it is how they understand R&D activities; this year, that figure went down to 19.4%.

Findings

What best describes your R&D activity?

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Cooperation with external entities by meansof purchasing R&D services / IP / know-how

Developing important innovation /a breakthrough solution for various markets

Joint realization of research projects aiming at improvementor development of new products / processes /

services with other capital group entities / companies

Development of new products / processes / services

Changes / improvements of existing products /processes / services leading to better performance /

characteristics of products/processes/services

0,0 0,5 1,0 1,5 2,0 2,5

Other factors

Possibility of cofinancing costs of IP protection procedures,including costs of protection maintenance period





Access to and cooperation with universities / research





Availability of more types of benefits

0% 5% 10% 15% 20% 25% 30%

Other

My company is familiar with how to prove that its activities are R&Dbut the company’s reporting / cost tracking / time sheet / etc. systems

are not capable of appropriate recording / proof of related costs

I believe that my company does not carry out any R&D activities /projects that would be eligible for R&D tax incentives

My company is familiar with R&D tax incentives but uncertainabout which activity could be classified as R&D and how to prove

that its activities are R&D (classification of activities as R&D activities)

R&D tax regulations are not clearand are presenting too many risks for the company

My company is not very familiar with the methodson how risks related to classification

of its activities as R&D could be managed

My company is uncertain about the approachof the tax authority with respect to R&D costs;

therefore I find the use of these tax incentives risky

My company is rather unfamiliar with R&D tax incentives

0% 5% 10% 15% 20% 25% 30% 35% 40%

Grant opportunities relevant for our company wouldrequire involvement of partners (consortium), but the nature

of our R&D project / our business interests do not allowsuch co-operation with third parties

Do not use them

Has no sufficient resources to monitor such opportunitiesand eventually prepare successful application(s)

Not very familiar with R&D grants

Familiar with R&D grants and use them

0,0 0,4 0,8 1,2 1,6 2,0






Human capital management focused on recruitingand retaining most valuable people

R&D financing

0% 10% 20% 30% 40% 50% 60% 70%

None

Industrial design

Copyright

Trademark

Patents / utility design


65,2%

67,0%

60,0%

88,0%

29,4%

49,0%

24,5%

81,0%

13,9%

25,0%

2013

2014


Spending on R&D

The 2014 report shows that in 2013 20.6% of companies allocated less than 1% of their turnover to R&D – this went up from 15% in 2012. There was also an increase in companies allocating less than 3% of their turnover to R&D (rising to 41.8% from 36% in 2012).

Meanwhile, just 22.1% of companies allocated more than 10% of their turnover on R&D, down from 24%. However, in Slovakia (as in the previous year) and Bulgaria the percentage is well above average at 54.5% and 40% respectively.

Only 5.5% of companies allocated no expenditure for R&D activities in 2013, down from 2012’s 10%. Hungary (17.8%) and Poland (9.7%), however both significantly exceeded the average.

20.5% of companies in Croatia, 12.1% in Slovakia and 11.1% in Poland do not know how much expenditure has been allocated to R&D activities. In Poland, this might be the case because there are no effective incentives in place that encourage them to keep solid records of their R&D expenditure.

Across the region, 88.5% of companies plan to maintain the current level of spending or increase it in the short term (one to two years). At the same time, 89.7% expect to maintain or increase spending in the next three to five years. All the respondent companies in Lithuania and Estonia are confident that there will be no decrease in spending on R&D over the next five years.

Across the region, 4.8% of respondents expect to make no expenditure in the next five years - only in Bulgaria, Estonia and Lithuania did no respondents make this claim. It is also worth noting the results from Romania, where 67.9% of companies plan to increase expenditure in the next two years and 78.6% in the next three to five years (the averages for the region are 42% and 58% respectively).

Responses indicate positive forecasts in terms of the economic situation of companies, and may result from the fact that in years to come significant R&D support will be available from EU funds.

What percentage of your turnover was spent on R&D in 2013?0% 10% 20% 30% 40% 50% 60% 70% 80% 90%








0,0 0,5 1,0 1,5 2,0 2,5

Other factors












0% 5% 10% 15% 20% 25% 30%

Other












0% 5% 10% 15% 20% 25% 30% 35% 40%



Do not use them




0,0 0,4 0,8 1,2 1,6 2,0







R&D financing

0% 10% 20% 30% 40% 50% 60% 70%

None

Industrial design

Copyright

Trademark



7,3%

5,5%

20,6%

21,2%10,6%

12,4%

22,1%

Between 1% and 3%

Between 5% and 10%

None

Above 10%

Less than 1%

Between 3% and 5 %

I do not know

18

To what extent would the external factors mentioned below influence the increase of your R&D spending in the coming 1-2 years?

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%








0,0 0,5 1,0 1,5 2,0 2,5

Other factors












0% 5% 10% 15% 20% 25% 30%

Other












0% 5% 10% 15% 20% 25% 30% 35% 40%



Do not use them




0,0 0,4 0,8 1,2 1,6 2,0







R&D financing

0% 10% 20% 30% 40% 50% 60% 70%

None

Industrial design

Copyright

Trademark



2,112,22

1,941,92

1,87

1,821,67

1,781,44

1,541,42

1,51,61

1,36

1,321,29

1,28

1,21

0,321,14

2013

2014


As in the previous survey, the most important factor affecting the level of expenditure on R&D over the next two years is to be the availability of more types of incentives – this was chosen as the most important factor by more than 50% of companies in Bulgaria, Estonia and Romania, and almost 54% of companies in Poland.

The next most important factors are the availability of skilled and experienced researchers (particularly impor-tant in Bulgaria and Lithuania, where it is the most important factor for over 60% of companies) and issues related to the cost of R&D activities (selected by 50% of companies from Lithuania).

Respondents indicate that the availability of grants stimulates spending more than the availability of tax incentives. This is particularly the case for companies in Bulgaria and Poland, where 48% or more chose this answer. The importance of grants is growing too – in 2014, they were chosen by 34.5% of respondents across the region, compared to 22% in 2013.

In Slovakia, while over 50% of companies declare that grants are more important than tax incentives in influencing their R&D expenditure, only 12% say more tax incentives would not be an influencing factor. This is of significant importance as a new tax incentive is to be introduced there on July 1st 2014, which is expected to have a positive impact on R&D spending in Slovakia.

One factor that has declined in importance is the stability of the regulatory environment. In 2013, this was the factor with the greatest impact on expenditure for 22% of respondents; in 2014, it has fallen to 18.8%. This may mean that there is a gener-ally positive attitude to those authorities that have not made significant changes in the legislation regulating R&D.

Almost 47% of companies in Latvia consider the possibility of co-financing the costs of IP protec-tion procedures, including the costs of maintaining protection, to be a factor with no influence on their R&D spending.

The internationalexperienceofGMindicatesthatthe availabilityofincentivesforR&Dactivities,thatmaybean elementofa long-termdevelopmentstrategy,significantlyfacilitates“acquisition”andexecutionofhigh-techprojectsbycompaniesinlocalcountries.

Paweł Widel, Governmental Relations Director, General Motors Poland Sp. z o.o.

20

Companies’ R&D policies and Intellectual Property / know-how protection

Almost 21% of companies in the region say they have no R&D policy. Clearly above average in having no policy are companies from Estonia (50%), Hungary (42.2%), Croatia (28.2%) and Poland (27.8%).

The key factors for the majority of R&D policies are sources of funding and the availability of appro-priate human resources. In terms of R&D financing, an above average number of responses indicate that this is the most important factor for companies from Romania (57.1%), Slovakia (45.5%) and Poland (43.1%).

At the same time, 15.6% of companies from Hungary declare that this is a factor without any influence at all on their R&D policy.

Significant numbers of companies in Romania (60.7%), Slovakia (54.5%) and Lithuania (50%) recognise Human capital management focused on recruiting and retaining the most valuable people as the most important factor.

Please rate importance of the following aspects in your firm’s R&D policy(0 - no influence, 3 - highest influence)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%








0,0 0,5 1,0 1,5 2,0 2,5

Other factors












0% 5% 10% 15% 20% 25% 30%

Other












0% 5% 10% 15% 20% 25% 30% 35% 40%



Do not use them




0,0 0,4 0,8 1,2 1,6 2,0







R&D financing

0% 10% 20% 30% 40% 50% 60% 70%

None

Industrial design

Copyright

Trademark



1,96

1,92

1,80

1,48

1,46

1,44

1,34


The most common means of protecting IP / know-how (at 64.8% firms across the region) is the company secrets policy. This is above average in Estonia (87.5%), Croatia (79.5%) and Poland (76.4%). The trademark is the most popular form of protection in Romania (75%) and Bulgaria (53.3%). 44.2% of companies in the region benefit from patent protection, but only 23.1% do so in Croatia and 20% in Latvia. While 9.7% of companies in Central Europe do not protect their IP / know-how, this figure is significantly higher in Hungary and Lithuania (25%). All respondents from Romania and Estonia declared that they protect their IP / know-how.

The mostefficientandeffectivewaytomanageintellectualpropertyrightsisa tailor-madepolicythatcombinespatentsandtradesecretsprotection.

Łukasz Socha, Vice President, HS Wrocław sp. z o.o.

How do you protect Intellectual Property / know-how in your company?

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%








0,0 0,5 1,0 1,5 2,0 2,5

Other factors












0% 5% 10% 15% 20% 25% 30%

Other












0% 5% 10% 15% 20% 25% 30% 35% 40%



Do not use them




0,0 0,4 0,8 1,2 1,6 2,0







R&D financing

0% 10% 20% 30% 40% 50% 60% 70%

None

Industrial design

Copyright

Trademark


Company secrets policy 64,8%

43,0%

41,5%

30,0%

20,0%

9,7%

22

Usage of R&D grants and tax incentives

Increasing numbers of companies say they are not very familiar with the methods of managing risks associ-ated with the classification of their activities as R&D; this has risen from 19% in 2013 to 22.7% in this year’s report. Also rising are those saying that R&D tax regu-lations are not clear and present the company with too many risks (up from 18% to 22.1%). These find-ings may mean that the systems of R&D tax incentives are becoming unclear; fewer companies are therefore

benefitting from it, leading to a strong preference for grants (as shown by the answer to the previous ques-tion). There is a lack of knowledge about tax incentives among 67% of companies from Bulgaria. In Latvia, 60% of companies state that they do not carry out any R&D activities or projects that would be eligible for R&D tax incentives. This is an important finding given the introduction of a new R&D tax incentive on July 1st 2014.

Companies’ statements about R&D tax incentives

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%








0,0 0,5 1,0 1,5 2,0 2,5

Other factors












0% 5% 10% 15% 20% 25% 30%

Other












0% 5% 10% 15% 20% 25% 30% 35% 40%



Do not use them




0,0 0,4 0,8 1,2 1,6 2,0







R&D financing

0% 10% 20% 30% 40% 50% 60% 70%

None

Industrial design

Copyright

Trademark



27,6%

25,3%

27,3%

27,5%

22,7%

18,5%

22,1%

17,6%

22,1%

23,2%

18,8%

20,6%

13,3%

12,9%

11,5%

11,6%

2013

2014


Across the CE region, 37% of companies are familiar with and use R&D grant opportunities (up from 31% in the 2013 survey). This proportion is particularly high in the Czech Republic (almost 60%) and far below average in the Baltic countries (16%). At the same time, 23% of respondents across the region are not very familiar with R&D grants (rising to 43.6% in Croatia and 42.9% in Romania).

In addition, 19.4% of respondents indicate that they do not have sufficient resources to monitor grant opportunities and submit a successful application (down from 25% in 2013); in Poland, however, the figure is almost twice as high at 36.1% (an increase from 29% in 2013). Such answers about discouraging bureaucracy and doubts concerning the use of available sources of support are particularly alarming when we consider that companies claim that their R&D spending is largely determined by the avail-ability of external funding.

Companies’ statements about R&D grants

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%








0,0 0,5 1,0 1,5 2,0 2,5

Other factors












0% 5% 10% 15% 20% 25% 30%

Other












0% 5% 10% 15% 20% 25% 30% 35% 40%



Do not use them




0,0 0,4 0,8 1,2 1,6 2,0







R&D financing

0% 10% 20% 30% 40% 50% 60% 70%

None

Industrial design

Copyright

Trademark



37,0%

30,5%

23,0%

21,9%

19,4%

24,5%

13,6%

15,5%

9,4%

4,3%

2013

2014

24

Co-operation with third parties while carrying out R&D projects

A very high proportion (78.2%) of companies say they work with third parties during the implementation of R&D projects (up from 65% in 2013). While the most important primary factor driving co-operation across the region is that it’s vital to carrying out projects, grant requirements and the possibility of receiving higher funding are almost equally important in Poland. For those companies that have their own R&D centres (either within the immediate structure of the business or in a sister firm in the same capital group), this is the most important reason for not collaborating with third parties.

While most companies in the CE region co-operate with universities / academies of science, there is an increase in the importance of public and private R&D / scientific institutes (29.8% and 35.7% respec-tively, up from 25.8% and 33.8%).

Cooperation with third parties when the companies are carrying out R&D projects

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%








0,0 0,5 1,0 1,5 2,0 2,5

Other factors












0% 5% 10% 15% 20% 25% 30%

Other












0% 5% 10% 15% 20% 25% 30% 35% 40%



Do not use them




0,0 0,4 0,8 1,2 1,6 2,0







R&D financing

0% 10% 20% 30% 40% 50% 60% 70%

None

Industrial design

Copyright

Trademark



0% 10% 20% 30% 40% 50% 60% 70% 80% 90%








0,0 0,5 1,0 1,5 2,0 2,5

Other factors












0% 5% 10% 15% 20% 25% 30%

Other












0% 5% 10% 15% 20% 25% 30% 35% 40%



Do not use them




0,0 0,4 0,8 1,2 1,6 2,0







R&D financing

0% 10% 20% 30% 40% 50% 60% 70%

None

Industrial design

Copyright

Trademark



0% 10% 20% 30% 40% 50% 60% 70% 80% 90%








0,0 0,5 1,0 1,5 2,0 2,5

Other factors












0% 5% 10% 15% 20% 25% 30%

Other












0% 5% 10% 15% 20% 25% 30% 35% 40%



Do not use them




0,0 0,4 0,8 1,2 1,6 2,0







R&D financing

0% 10% 20% 30% 40% 50% 60% 70%

None

Industrial design

Copyright

Trademark



Our Company has got an R&D Centre in other firm of capital group

It is required in order to receive higher cash grant for conducting an R&D project

It is required to apply for grant

Yes

Other reason

Other reason

No

Our Company has got an R&D Centre It is needed for conducting out research projects

43,1%

43,1%

20,8%

21,8%

78,2%

25,2%

7,4%

68,6%

22,5%


26

Regionalcontacts

R&D and Government Incentives

CENTRAL EUROPEMagdalena Burnat-MikoszPartnerPhone: +48 22 511 00 65E-mail: [email protected]

BULGARIAGeorgi SarakostovPartnerPhone: +359 (2) 8023 118E-mail: [email protected]

CROATIASonja IfkovićDirectorPhone: +36 1 2351 915E-mail: [email protected]

CZECH REPUBLICLuděk HanáčekDirectorPhone: +420 246 042 108E-mail: [email protected]

ESTONIAVeiko HintsovPartnerPhone: +372 6406512E-mail: [email protected]

HUNGARYDr. Csaba MarkusDirectorPhone: +36 (1) 428 6793E-mail: [email protected]

LATVIAJānis ČupānsDirectorPhone: +371 (6) 7074171E-mail: [email protected]

LITHUANIATatjana VaičiulienėDirectorPhone: +370 (5) 2553004E-mail: [email protected]

POLANDMagdalena Burnat-MikoszPartnerPhone: +48 (22) 511 00 65E-mail: [email protected]

Michał TurczykDirectorPhone: +48 (12) 394 43 38E-mail: [email protected]

ROMANIAOana PetrescuPartnerPhone: +40 (21) 2075 288E-mail: [email protected]

SLOVAKIAMartin RybarDirectorPhone: +421 258 249 113E-mail: [email protected]

CE Clients & Markets

Halina FrańczakDirectorPhone: +48 (22) 511 00 21E-mail: [email protected]

Cem TuranManagerPhone: +420 234 078 464E-mail: [email protected]


Martin RybárDirectorGovernment Incentives and R&DDeloitte SlovakiaPhone: +421 910 828 333E-mail: [email protected]

Kamil NepšinskýSenior CoordinatorMarketing and Business DevelopmentDeloitte SlovakiaPhone: +421 2 582 49 330E-mail: [email protected]

Localcontacts

This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, any of its member firms or any of the foregoing’saffiliates (collectively the “Deloitte Network”) are, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or otherprofessional advice or services.

This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect yourfinances or your business. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualifiedprofessional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this publication.

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Slovakia Corporate R&D Report 2014 - Deloitte US · Slovakia Corporate R&D Report 2014 3 ... for research and technological development / Horizon 2020) EU co-ﬁnanced R&D grants