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Spain introduces new measures aimed at improving R&D tax support
R&D tax support available under Spanish tax law includes tax credits for expenses related to R&D and technological innovation activities (R&D&I), which can currently be used to offset up to 42% of a company’s corporate income tax liability. The Spanish system of R&D support also includes the so-called “Patent Box” regime, consisting of the partial reduction of the taxable income arising from the licensing of certain intangible assets.
Under Spanish law, R&D tax credits are subject to a limit (which in the best-case scenario could reach 60% of the gross tax payable) which prevents many innovative companies from benefiting from these incentives because their profits are not high enough.
Law 14/2013, of 27 September, created to support entrepreneurs and their internationalisation (the “Entrepreneurs’ Law”), seeks to mitigate the situation described above. Law 14/2013 provides taxpayers with the option of taking tax credits with no limits (subject to a 20% discount) and even of recovering unused tax credits on their tax return.
The maximum annual tax credit eligible under this special regime is set at EUR 3 million (or EUR 1 million for technological innovation activities, where no R&D is included). It is only applicable if the taxpayer has not been able to use the full tax credit in the year after it was generated.
Additionally, the following conditions must be met:
i) the average headcount or, alternatively, the average headcount assigned to R&D&I activities, must be maintained
ii) the total sum of the tax credit taken or paid must be used to finance R&D&I activities
iii) the taxpayer must have a reasoned report on the classification of the activity as R&D&I, or an advance pricing agreement on the expenses relating to those activities
The Entrepreneurs’ Law also aims to boost the Spanish Patent Box regime by providing greater certainty to the taxpayers willing to apply this tax incentive. The law introduces the possibility for taxpayers to obtain an advance pricing agreement from the tax authorities on the income deriving from the licensing of intangible assets and the related expenses. Taxpayers can also obtain an advance agreement on the classification of the intangible assets as belonging to one of the categories included in the incentive.
Other amendments introduced in the Patent Box regime by the new legislation are as follows:
- The tax reduction is increased from 50% to 60%; however, the tax base is now the net income, rather than the gross revenue
- The reduction is also available for income derived from IP assets which have been partially created by the company in a portion of at least 25% of their cost (previously the licensor had to have created the assets in their entirety)
- The reduction is not only applicable to the licensing of intangible assets but also to their transfer, provided that the transfer is between entities that do not form part of the same corporate group
- The ceiling of the benefit, consisting of six times the cost of the assets, disappears
Quality tax advice, globally
These amendments should improve the effectiveness and utilisation of these tax incentives by companies. The amendments may also prove to be a significant benefit within the investment plans of multinational enterprises with a presence in Spain. As a result, multinationals should monitor these amendments closely to ensure opportunities are maximised where possible.
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