Patent box and technology incentives: Tax and financial reporting considerations

August 2013
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Patent box and technology incentives: Tax and financial reporting considerations

At a glance

This publication discusses key tax and financial reporting considerations of patent box regimes and other technology incentives.

Business expansion and transformation attributable to technological advances has escalated the competition among governments to attract research investments through the use of tax subsidies. The historic focus of incentives towards front-end expenditures has now evolved towards the use of income-based incentives such as patent box regimes. Depending on the terms and operation of each specific incentive, varying financial reporting impacts may occur. The incentives may yield potentially disparate results, depending on the industry and the existing accounting profile and policies of a particular company.

It is more important than ever for companies to understand, and continually assess, the financial accounting for credits and incentives to ensure timely identification, reporting and disclosure of such benefits. Financial reporting considerations are similarly being given increased attention by policymakers in the design of tax law incentives, which may again become apparent in the context of US tax reform proposals.