No innovation contribution needs to be paid
Micro and small businesses do not have to pay innovation contribution (middle-sized businesses, however, do). The innovation contribution, along with the local business tax, represents a higher tax burden for many companies than corporate tax.
No transfer pricing documentation needs to be prepared
Micro and small businesses do not have to prepare transfer pricing documentation (middle-sized businesses, however, do). This can save significant costs.
Investment tax base deduction is available
SMEs can benefit from an investment tax base deduction for real estate that has not been used before (including renovations, extensions, changes in purpose, or alterations that increase the property's acquisition cost) or for technical equipment, machines, vehicles, software usage rights, or intellectual property that have not been used before. This means that the investment cost can be deducted twice from the corporate tax base: once under this benefit and once again under depreciation. However, this benefit can only be applied by SMEs with solely private individual owners, and the benefit amount cannot exceed the pre-tax profit.
Tax benefits are available for tangible assets
SMEs can also benefit from tax reductions on loans or financial leasing interest taken from financial institutions for the acquisition or production of tangible assets. This means that interest paid to the bank can be directly deducted from the corporate tax payable, allowing businesses to acquire or produce tangible assets without financing costs. However, it is important that the relevant tangible asset is not removed from the books for 4 years; otherwise, the tax benefit must be repaid with delayed interest. Also, like most tax benefits, this one can only reduce corporate tax up to a maximum of 70% of the payable tax.
Summary
There are several tax benefits and favorable opportunities available for micro and small businesses, which help them reduce corporate tax and improve their competitiveness. One such benefit is the exemption from innovation contribution, which micro and small businesses do not have to pay. This is particularly important because, along with local business tax, the innovation contribution could represent a high tax burden, which will not apply to micro and small businesses. By eliminating the innovation contribution, companies can allocate more resources to their own development and growth. Additionally, micro and small businesses are exempt from preparing transfer pricing documentation, saving them significant administrative costs and allowing them to focus more on their business activities.
One of the most important tax benefits for micro and small businesses is the investment tax base deduction, which allows them to make significant investments without having to consider their full tax base. Under this benefit, SMEs can deduct their investment costs twice: once as a benefit and once more through depreciation. The combined use of the innovation contribution exemption and investment tax base deduction provides a major advantage for SMEs, offering them more room for development and exploring new market opportunities. Furthermore, SMEs can also benefit from tax reductions related to their tangible assets, such as interest on loans or financial leasing, which can reduce their corporate tax obligations.
The tax benefits offered to micro and small businesses, along with the exemption from transfer pricing documentation requirements, are increasingly important as cost reduction and competitiveness enhancement are crucial for SMEs. The tax benefits for tangible assets offer companies the opportunity to acquire or produce necessary assets more easily while reducing their corporate tax. By combining the exemption from innovation contribution and investment tax base deduction, micro and small businesses can gain financial advantages that support their long-term growth and sustainability.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
