Taxation for R&D activities

What is the Taxation for R & D & I?

Among the instruments available to the administration for the promotion of business innovation are tax incentives and bonuses. Tax incentives are based on deductions in corporate tax for the realization of research and development projects and / or technological innovation.

Tax incentives are based on deductions in corporate tax, that is, reducing the amount of the tax that must be paid for profits in the company.

Tax deductions for Research, Development (R&D) and / or Technological innovation (iT) projects are one of the instruments used by the General State Administration to promote business R&D, via tax reduction. Its recipient is the taxpayers of said tax.

The Spanish system of tax deductions for R & D & I is one of the most favorable in the world, being able to reach up to 42% of direct expenses. Compared to other incentives for R & D & I, tax deductions have the following advantages:

  • They have economic effects comparable to those of the subsidy, but they are not taxed.
  • The application is free (all kinds of knowledge areas and spending volumes), and general (for all companies, whatever their CNAE or size).
  • Deductions are not subject to competitive concurrence with a predefined budget; they are generated by each company, when they carry out R&D and / or iT activities, in accordance with the definitions established in the Corporate Tax Law.
  • The generation of the tax deduction is proportional to the R & D & I activities carried out, and is applied in the annual corporate tax settlement, up to a certain quota limit. However, the deduction generated but not applied can be applied in subsequent years, and there is even an assumption of monetary advance of the deduction pending application.

Definitions and deductible expenses

  • R&D – Research

Original and planned inquiry that seeks to discover new knowledge and a superior understanding in the scientific and technological field (Article 35.1 of Law 27/2014, of November 27, on Corporation Tax).

Significant technological improvement

Objective novelty (scientific-technological advance for the sector)

  • R&D – Development

Application of research results (…) for the manufacture of new materials or products or for the design of new processes or production systems, as well as for the substantial technological improvement of pre-existing materials, products, processes and systems (Article 35.1 of Law 27/2014, of November 27, on Corporation Tax).

Significant technological improvement

Objective novelty (scientific-technological advance for the sector)

  • i – Technological Innovation

Activity whose result is a technological advance in obtaining new products or production processes or substantial improvements to existing ones. Those products or processes whose characteristics or applications, from a technological point of view, will differ substantially from those previously existing (Article 35.2 of Law 27/2014, of November 27, on Corporation Tax) will be considered new.

Significant technological improvement

Subjective novelty (technological advancement for the entity)

Deduction is generated for the following causes:

Expenses associated with the project (personnel, amortizations, expendable materials, external collaborations, and others), provided that they meet the following conditions:

Direct costs,

Individualized by projects and

Applied effectively to the project. The percentage of deduction on expenses will depend on the scientific-technological qualification:

25% in case of R&D (plus 17% more in research staff with exclusive R&D dedication)

12% in case of technological innovation

Total annual expenditure increase in R&D projects compared to the average of previous years. In the event that the expenses incurred in carrying out R&D activities in the tax period are greater than the average of those incurred in the previous two years, the percentage established in the previous paragraph (25%) up to said average, and 42% over the excess with respect to it.

How long can I request help?

In general, tax deductions can be requested until 07/25/2020. correspond to investments in R & D & I made in the year of 2019. (See the taxation in each Autonomous Community to present the motivated reports)

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