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Preliminary Bill on Support for Entrepreneurs and their Internationalisation

Spain
Following the session of the Council of Ministers held on 24 May 2013, the definitive version of the Preliminary Bill on Support for Entrepreneurs and their Internationalisation has been publicly unveiled. The Preliminary Bill seeks to boost entrepreneurial activity in Spain and, with this in mind, introduces a number of important changes in the different areas that are involved in the creation and start-up of new ventures. Taxand Spain details the opportunities available further to the publishing of this Preliminary Bill.

The Preliminary Bill highlights two measures that will generally affect all corporate income taxpayers, namely:

  • An improved R&D tax credit. This change significantly improves the tax credit for R&D activities by removing the limit on the amount of gross tax payable against which it can be taken (subject to a 20% discount on this credit). Qualifying taxpayers can even apply to the tax authorities for payment of the tax credit (subject to a limit). In Spain, the tax credits reduce the tax payable and if they are not fully applied in a financial year are left pending for another exercise. With this amendments, although there may be no tax payable, MNCs can ask the administration to return the amount of tax credit.
    However, the benefit is conditional to meeting requirements linked to maintaining jobs and using an amount equivalent to the tax credit taken or obtained for the same activity.
  • Change in the Spanish patent box regime. The change affects the reduction in the calculation base and restricts relief to the income/gains obtained and not to revenues as was previously the case. The new calculation will be based on the positive difference between revenues and certain expenses directly related to the licensed intangible. Now, 40% of the amount of the income/gains will be included in the entity’s tax base. Finally, it will be possible to apply the patent box (subject to certain requirements and limits) in cases where the licensor has not created the licensed assets

A second consequence of this patent box change is that the quantitative limits on the amount of the incentive (currently six times its development cost) disappear. This establishes the possibility of applying to the tax authorities for a prior agreement on characterisation of the assets, and the possibility of valuing the income/gains generated.

The Spanish government has also introduced measures aimed at encouraging enterprise start-ups and also support for self-employed entrepreneurs wishing to set up business. These measures most notably include the following:

  • VAT: to mitigate the problems faced by small enterprises in terms of liquidity and access to credit, a special VAT cash-basis accounting scheme is created for taxable persons with a turnover not exceeding EUR 2 million. Under this scheme, qualifying taxable persons can elect to apply a system that delays the accrual, reporting and payment of the output VAT on most of their commercial transactions until full or partial collection from their customers. Equally, their right to deduct the input VAT on their acquisitions will be delayed until they pay their suppliers for such acquisitions.
  • Tax incentives for “business angels”: the Preliminary Bill introduces a new personal income tax credit for investments in new or recently-formed enterprises, and an exemption for gains derived from subsequent divestments, provided that they are reinvested in another entity of the same type.

Your Taxand contacts for further queries are:
Vicente Bootello
T. +34 91 514 52 00
E. vicente.bootello@garrigues.com ;

José Ignacio Ripoll
T. +34 91 514 52 00
E. jose.ignacio.ripoll@garrigues.com

Taxand's Take

Although, admittedly, the last two new developments will have a very local impact that is restricted to small enterprises, entities engaging in research activities in Spain should analyse in detail the new reforms. The patent box regime and the R&D tax credit related reforms offer opportunities for taxpayers which careful planning can open up.

Taxand's Take Author

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