The implied tax subsidy rates for large profitable firms vary significantly among countries that grant notable relief, ranging from 1 percent in Denmark to 39 percent in Portugal. France and Poland provide the second and third most generous relief after Portugal, with implied tax subsidy rate of 36 percent.
Of the countries that grant notable relief, Denmark (1 percent), Cyprus (2 percent), and Estonia (4 percent) are the least generous. The implied tax subsidy rates of Bulgaria, Georgia, Latvia, Luxembourg, Malta, and Switzerland do not show any significant expenditure-based R&D tax relief.
Among the 33 major European countries with available data, the average implied subsidy rate for profitable large firms is 16 percent in 2025. In comparison, the United States only grants a subsidy rate of 7 percent to large profitable firms, while China grants a subsidy rate of 32 percent.
The OECD also provides implied tax subsidy rates for loss-making firms and for small and medium-sized enterprises (SMEs). Most countries covered in today’s map provide the same expenditure-based R&D tax relief to large firms and SMEs. Only France (in the case of loss-making firms), Germany, Iceland, and the Netherlands are relatively more generous to SMEs than to large firms. Croatia offers slightly higher relief to large firms than to SMEs.
Some countries’ R&D tax incentives include refunds and carryover provisions, changing the implied tax subsidy rates for loss-making firms relative to profitable firms. This has resulted in lower average implied tax subsidy rates for loss-making firms relative to profitable firms, both for SMEs and large firms.
While R&D tax incentives can encourage businesses to increase their expenditure on research and development activities, targeting investment in genuine innovation with positive spillovers to the wider economy can be challenging and result in increased administrative and compliance costs to contain fiscal losses and determine qualified expenditures.
Policymakers can often support innovation at a lower revenue cost by improving the general tax treatment of the risky investment that innovative firms undertake by allowing them to fully recover their capital costs and offset their operating losses, rather than providing R&D-specific preferences.
Several European countries saw their tax subsidies for R&D expenditures increase since 2024. Lithuania and the Slovak Republic raised their corporate rates starting in 2025, thereby increasing the value of their preferential R&D deductions, lifting the implied subsidy rate for large profitable firms rose from 31 to 34 percent in Lithuania and from 28 to 33 percent in the Slovak Republic. The Netherlands explicitly raised tax credit rates for in-scope R&D, increasing the implied subsidy rate from 31 percent in 2024 to 35 percent in 2025.
On the other side of the Atlantic, the United States scrapped temporary R&D amortization requirements and restored its pre-2022 expensing regime, which—together with its R&D tax credits—raised the implied subsidy rate for large profitable firms from 3 percent to 7 percent.
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