Implementing research and development (R&D) projects requires significant financial investment, which is why R&D funding opportunities can be a great help for companies and institutions. However, to account for a project’s costs under a grant or tax incentive, specific accounting and financing rules must be followed.
Only those expenses directly related to the project, incurred during the project’s execution, and used exclusively for its implementation can be accounted for as eligible costs. Furthermore, if a project includes multiple activities, they must be classified into different R&D categories, such as applied research or experimental development, to determine the amount of eligible support.
So, what costs can be claimed exactly? Let’s take a look at the key categories:
1. Depreciation of Buildings and Infrastructure
R&D projects often require specialized laboratories or other research facilities. The rent or depreciation of these buildings can be accounted for, but only to the extent they are actually used for the project.
Example: A biotechnology company launches an R&D project to develop a new pharmaceutical product. The research takes place in a rented laboratory with a monthly rent of 500,000 HUF. If the laboratory is used 50% of the time for the project, half of the rent, i.e., 250,000 HUF, can be accounted for under the R&D support.
2. Depreciation of Equipment and Machinery
The depreciation costs of machines, tools, and equipment used in the R&D project can also be claimed, but again, only according to the proportion used for the R&D activities.
Example: An engineering firm develops a new 3D printing technology and purchases an industrial 3D printer worth 10 million HUF. If the printer is used 70% of the time for the R&D project, 70% of the depreciation cost can be accounted for as R&D support.
3. Personnel Costs
The wages, benefits, and social contributions of research and development staff are also eligible costs, as human resources are one of the key components of R&D projects. It is important to note that only the costs of employees directly involved in the project can be considered, and these expenses must be proportional to the amount of time dedicated to the project.
Example: A software development company is working on an AI-based image recognition system. An engineer working on the project earns a gross monthly salary of 1,200,000 HUF and spends 80% of their time on the R&D project. Therefore, 960,000 HUF can be accounted for under the R&D funding.
4. Material Costs
Materials, chemicals, test materials, or raw materials needed for prototypes used in research can also be accounted for as part of the funding. When accounting for material costs, it should be noted that they can be covered up to a maximum of 25% of the total project cost.
Example: An automotive company is developing a new type of lightweight alloy for vehicle parts. The special metal alloys required for the research cost 5 million HUF, which constitutes 20% of the total project cost, so the full amount can be accounted for.
5. Contractual Research Costs
It is common for a company to collaborate with external research institutes, universities, or other companies for certain parts of the R&D project. The costs for such external contractual research can usually be included as eligible costs.
Example: A medical device company is working with a university research laboratory to develop a new diagnostic device. According to the contract with the university, the cost of the research service is 10 million HUF, which can be fully accounted for because the research is conducted in cooperation with a higher education institution.
6. Equipment Purchase in Certain Grants
Some funding programs allow the full or partial financing of equipment purchases needed for R&D projects.
Example: A nanotechnology startup is applying for funding to purchase a new microscope costing 15 million HUF. Under the funding conditions, the grant can cover 50% of the equipment purchase, so 7.5 million HUF of the cost can be financed through the support.
Summary
Accurately determining the eligible costs for R&D support is crucial for companies to maximize their funding opportunities while adhering to accounting and grant regulations. Successful acquisition and use of R&D support require careful planning and detailed documentation to ensure that all project costs are appropriately justified and accounted for.
By following these guidelines and ensuring compliance with the rules, companies can effectively use R&D support to finance their projects and enhance innovation.
