Tax incentives now provide 60% of government support for business R&D across the OECD, more than double their 28% share in 2004, according to the newly updated OECD R&D Tax Incentives Database. R&D tax relief reached 0.16% of GDP in 2024, up from 0.05% in 2004, while direct funding for business R&D remained at 0.10%.
The OECD R&D Tax Incentives Database covers 56 countries including several major Asian economies for the first time. It captures the fiscal cost of these incentives; combined with estimates of direct government funding, they provide a more comprehensive measure of total government support for business R&D, excluding harder-to-quantify loans and other indirect forms of support.
A similar pattern emerges when R&D tax support for business is set against government budget allocations for R&D (GBARD), a broader measure of direct budgetary R&D support across all sectors. On this basis, tax support rose from 6% of reported R&D support in 2004 to 18% in 2024, outstripping growth in R&D funding directed to other sectors.
These incentives also form part of the broader industrial-policy mix. Across the 20 countries covered by the OECD's Quantifying Industrial Strategies (QuiS) database, government support for business R&D represents, on average, around 17% of total estimated industrial-policy support. R&D tax incentives alone account for 9% of that support, but for considerably higher shares in several countries: more than 18% in Canada, France, Ireland and the Netherlands, and as high as 31% in Israel.
Around half of OECD countries now channel most of their support for business R&D through tax incentives rather than direct funding. Across all covered economies, the highest levels of government R&D tax relief relative to GDP were observed in Portugal (0.42%), Iceland (0.28%) the United Kingdom and France (both 0.27%), and the People's Republic of China (hereafter China) (0.24%). When tax and direct support are considered together, Portugal (0.52% of GDP), Iceland (0.44%) and France (0.42%) provided the highest levels of total financial support for business R&D.
Beyond direct support (e.g. grants and R&D procurement) and expenditure-based incentives (e.g. R&D tax credits and allowances), many governments also offer relief on the income from R&D and related innovation efforts (e.g. patent boxes, which under international rules can only be granted to the outcomes of R&D or equivalent activities). Combining expenditure‑based and income‑based tax incentives raises the OECD average share of tax support in total government support for business R&D and innovation (R&I) from 60% to 70% in 2024.
Across all covered economies, Israel (0.36% of GDP), Cyprus (0.26%) and the Netherlands (0.21%) provided the highest levels of income‑based tax support in 2024 (or latest year). In the OECD, this support amounted to 0.07% GDP on average, but remained below 0.02% of GDP in half of the OECD countries offering such incentives (and for which data are available). Of total tax support (0.21% of GDP), expenditure‑based incentives account for about 70%, underlining their central role in the R&I support policy mix.
In 2025, 34 of 38 OECD countries offered tax relief for R&D expenditures, available to both SMEs and large firms. Costa Rica, Israel, Latvia and Luxembourg were the only OECD countries without such incentives. OECD estimates of implied marginal R&D tax subsidy rates measure the level of tax support that firms can expect for an additional unit of qualifying R&D expenditure, by firm size (SMEs, large firms) and profitability (profitable or loss‑making).
In 2025, the most generous support for profitable SMEs was found in Iceland, Portugal and Poland; for large firms in Portugal, Poland and France. Across Asia, China, Singapore, Malaysia and Hong Kong (China) clustered at or near the OECD average, regardless of firm size or profitability.
Two patterns stand out across the OECD: smaller R&D firms tend to be favoured over larger ones, and profitable firms over loss-making ones, since tax incentives are not always refundable. A profitable SME could expect a 19% subsidy, against 16% for a large firm; in a loss-making position, these rates fell to 17% and 13% respectively.
Across the OECD, the average tax subsidy per unit of eligible R&D expenditure approached its COVID‑19 peak in 2025. This upward trend, illustrated here for large profitable firms, holds across all four modelled scenarios, reflecting both the wider adoption and increased generosity of tax incentives over time.
The same momentum is also visible across several other Asian economies, including China, Hong Kong (China) and Vietnam. Hong Kong (China) and Vietnam introduced R&D tax incentives in 2018 and 2025 respectively, while China raised its tax allowances in successive steps, from 50% to 75% in 2019 and then to 100% in 2023.
Journalists are invited to contact Elisabeth Schoeffmann in the OECD Media Office (+33 1 45 24 81 18). For questions on the data, please contact RDTaxStatsContact@oecd.org.
