Tax incentive for companies
Definition and description
Tax incentives are the concessions in tax codes that mean a conscious loss of government budgetary revenue. They are usually intended by public authorities to encourage particular types of behaviour (in relation to education and training, in this case) and/or to favour specific groups (certain companies, e.g. SMES, in this case). Tax incentives reduce either the tax base (tax allowance) or the tax due (tax credit).
In the 2020 edition of the database, a differentiation is made between specific tax incentives for companies going beyond the tax treatment of company expenditure on training as a business/operational costs, and those related to the tax treatment of company expenditure on training as a business/operational costs only.
Training costs of companies are typically treated as operational costs, i.e. incurred by the economic process, and treated on equal footing with other costs such as costs for material or merchandise, rents or wages. By adding up to the total costs, they reduce the taxable balance (profits) between incurred costs and received income. When firms’ training costs are accepted as regular costs (and thereby reduce taxable profits), for the current period, the cost sharing equals to the marginal applicable corporate income tax rate. In years, where no profits are made, however, training costs are not balanced by reduced profit taxes, when no particular arrangements are in place allowing for deducting currents losses from future profits.
As far as training constitutes an investment in skills and competences, today’s costs for training (potentially resulting in lower profits) are expected to imply higher gains at a later stage, implying higher profit taxes, so that reduced tax revenues in one year are expected to be balanced by increased tax revenues in a later year.
Particular costs for training may be perceived as a component of an employees’ wage income (‘fringe benefits’), implying that while the companies’ profit taxes are reduced by this wage component, individuals may be required to pay personal income tax for a defined amount, defined as the wage equivalent for the received training support (e.g. fees covered for attending programmes leading to a formal qualification). (See incentives for individuals).
Across countries, company training expenditure typically reduces company tax base. However, variations exist across countries with regard to the maximum amount of deductible training costs, the tax rate applied (which may include different rates by company size), the share of training costs that can be deducted, the possibility to include other costs than fees (e.g. travel, accommodation), and whether wage costs can be included. While the tax treatment of training costs as operational costs is a general rule, in a small number of countres enterprises might receive additional tax incentives related to their training activities.
Diffusion across the EU
- Established
- Not established
- Not covered
Key features and statistics
ID | Country | Name of the instrument - Local language | Name of the instrument - English translation | Type of tax incentive | Sub-type of instrument | Net effect of the tax incentive | Threshold of eligible costs eliciting a tax incentive (maximum) (EUR) | Threshold of eligible costs eliciting a tax incentive (minimum) (EUR) | Personnel absence costs/ wage costs during training covered | Preferential treatment options established |
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27 | BG | Данъчно стимулиране при предоставяне на стипендии | Tax incentives related to the provision of scholarships | Tax allowance (deduction from tax base) | Incentive for promoting training | Not available | No | No | No | No |
88 | FR | Crédit d'impōt pour dépenses de formation des dirigeants d'entreprise | Tax credit for training expenses of entrepreneurs | Tax credit (deduction from tax due) | Incentive for promoting training | 34% to 71% | EUR 406, maximum deductable amount from taxable profits (in 2020) | 40 hours per year corresponding to EUR 406. | No | No |
95 | HR | Državna potpora za obrazovanje i izobrazbu | State aid for education, training and research and development projects | Tax allowance (deduction from tax base) | Incentive for promoting training | 35% to 80% | 35% (55% for SMEs) of the cost of specific education and training. | No | Yes | No |
187 | RO | Bursă privată | Private scholarships | Tax allowance (deduction from tax base) | Incentive for promoting training | Not available | Up to 3% of yearly turnover but under 20% of the due tax on the profit | No | No | No |
193 | SI | davčna olajšava za vlaganja v raziskave in razvoj | Research & development tax incentive | Tax allowance (deduction from tax base) | Incentive for promoting training | Not available | Up to 100% of labour cost of employees on the project, all training expenses connected with the project. | No | No | No |
194 | SI | olajšava za izvajanje praktičnega dela v strokovnem izobraževanju | Tax allowance for practical part of vocational education | Tax allowance (deduction from tax base) | Incentive for promoting training | Not available | Up to 20% of average monthly salary per person | No | No | Yes |
219 | FI | Koulutusvähennys | Tax allowance for companies - Deduction in company income tax for employee training expenses | Tax allowance (deduction from tax base) | Incentive for promoting training | Not available | Half of average wage costs for up 2-3 days of training per employed | More than one day of training (shorter training spells are not eligible) | No | Yes |
292 | IT | Credito di imposta formazione 4.0 | Training tax credit 4.0 | Tax credit (deduction from tax due) | Incentive for promoting training | Not available | EUR 300 000 (50%) for small enterprises; EUR 250 000 (40%) for medium-sized enterprises; EUR 250 000 (30%) large enterprises | No | Yes | No |
ID | Country | Name of the instrument - Local language | Name of the instrument - English translation | Year | Volume of funding (EUR) | Year | Number of beneficiaries (companies) |
---|---|---|---|---|---|---|---|
27 | BG | Данъчно стимулиране при предоставяне на стипендии | Tax incentives related to the provision of scholarships | Not available | Not available | Not available | Not available |
88 | FR | Crédit d'impōt pour dépenses de formation des dirigeants d'entreprise | Tax credit for training expenses of entrepreneurs | 2020 | EUR 53 000 000 | 2018 | 52 840e |
95 | HR | Državna potpora za obrazovanje i izobrazbu | State aid for education, training and research and development projects | Not available | Not available | Not available | Not available |
187 | RO | Bursă privată | Private scholarships | Not available | Not available | Not available | Not available |
193 | SI | davčna olajšava za vlaganja v raziskave in razvoj | Research & development tax incentive | Not available | Not available | 2017 | 568 |
194 | SI | olajšava za izvajanje praktičnega dela v strokovnem izobraževanju | Tax allowance for practical part of vocational education | Not available | Not available | Not available | Not available |
219 | FI | Koulutusvähennys | Tax allowance for companies - Deduction in company income tax for employee training expenses | Not available | Not available | Not available | Not available |
292 | IT | Credito di imposta formazione 4.0 | Training tax credit 4.0 | Not available | Not available | Not available | Not available |