Boosting mergers and R&D
Faced with a sharp decline in mergers and acquisitions, the government is providing more generous tax incentives to encourage them. It also wants to reward companies that invest heavily in research and development, as well as angel investors that put up their own assets to finance startups and other small businesses in exchange for equity.
The draft bill presented to the cabinet Wednesday by Finance Minister Kostis Hatzidakis wants to encourage smaller businesses to merge. To this effect, it lowers the limit for merging businesses eligible for tax breaks to €100,000 from €125,000. And, to encourage research and development, spending on that activity can lead to a deduction in taxable income up to 315% – that is, over four times – the actual amount spent. The provision will especially target startups and collaboration with research centers and universities. In the latter case, R&D spending must exceed 20% of total expenditure.
The government wants to strengthen the involvement of Greece’s academic community with entrepreneurial activities. It also wants to raise the amount spent on R&D, which is less than half the European Union average: According to the latest Eurostat data, Greek corporations’ spending on R&D amounts to 0.73% of the country’s GDP, against 1.48% in the 27 EU member-states.
As another means to encourage innovation, the bill will add to the current provision of a three-year tax exemption for firms building applications on patents they have submitted. After the three-year period, a 10% tax break will be in effect for seven years.
Angel investors can spent up to €900,000 on startups, and have that amount deducted from their income.
Companies that merge, or expand as a result of a takeover, will get higher tax breaks if they do not shed jobs.
The bill will soon be submitted to public consultation.
Mergers and acquisitions slowed down significantly, especially in terms of value, in the first quarter of 2024. Compared to the first quarter of 2023, mergers and acquisitions were down 50%, and 19% less than in the fourth quarter of 2023. In terms of value, at €171.5 million, first-quarter mergers and acquisitions were down 96% year-on-year and 37% quarter-on-quarter.
