Global Daily Tax News, OECD Releases Study On Countries' Tax Incentives For R And D Income, (Dec 3, 2025)

The OECD recently released the findings of a study into the income-based tax incentives offered by advanced nations for companies investing in research and innovation.

According to the OECD, these income-based R&D tax incentives (IBTIs) reduce firms' tax liabilities by 35 percent on average in OECD countries in 2024. That year, IBTIs were available in 21 out of the 38 OECD countries, and in 15 out of 27 EU countries. Such incentives can include intellectual property (IP) regimes, such as innovation or patent boxes that target solely income from certain IP assets, or reduced rates for innovative businesses.

IBTIs are used less frequently by jurisdictions than expenditure-based R&D tax incentives (XBTIs) and represent on average 30 percent of the combined tax support for R&D and innovation, with significant cross-country variation.

New OECD estimates indicate that, on average, IBTIs reduce the overall tax liability that a firm faces on an internally generated R&D asset by 35 percent in the OECD area and by 67 percent in OECD countries with such policies in place in 2024.

Among countries that offer IBTIs at central government level, effective average tax rates (EATRs) are lowest in Malta, Israel, and India, and highest in China, Greece, and Korea.

Total income-based tax support is heavily concentrated in a small group of large economies, namely the United States (USD23.5bn), the Netherlands (USD2.9bn), the United Kingdom (USD2.9bn), Italy (USD1.7bn), and Belgium (USD1.5bn). These five OECD economies account for around 90 percent of total income-based tax relief for R&D and innovation in the OECD area.

The OECD noted: "Over the past two decades, the number of OECD countries offering tax relief for income from R&D and innovation has increased fourfold from five in 2000 to 21 in 2024, and sixfold in the case of EU countries, from three in 2000 to 15 in 2024. Tax regime changes to align with the BEPS Action 5 minimum standard introduced in 2015 led to a decrease in the generosity of IBTIs in more recent years."