Tax deductions for R&D activities are one of the instruments used by the General State Administration to encourage companies to invest in R&D and innovation. In recent years, the Ministry of Science, Innovation and Universities has reduced the time required to obtain the Binding Reasoned Reports (IMV), an instrument that provides greater legal certainty to companies in the event of a possible tax inspection.
At the end of each year, the Ministry issues a notification granting a reduced period to submit all the documentation necessary for the assessment of the BVIs for the previous tax year.
The requirement to provide the documentation will be sent 11 months after the close of the corresponding tax year, which in entities with a tax year that coincides with the calendar year, will bring this notification forward to the beginning of December, thus reducing the deadline for obtaining the IMVs.
Therefore, Euro-funding believes it is necessary to start identifying projects eligible for tax deductions for R&D&I activities as soon as possible. Companies have a shorter period of time to complete the entire certification process necessary to obtain the Binding Reasoned Report, with the advantage of obtaining the certificate more quickly.
The Spanish system of tax deductions for R&D&I is one of the most favourable in the world: the tax deduction for R&D activities can reach 42% of the expenditure incurred (even more if the personnel participating in the project is dedicated almost exclusively to R&D activities). The deduction for technological innovation (TI) activities is a more modest, but equally appreciable, 12% of the expenditure incurred.
The tax advantages offered by this tool have also been increased in the new wording of the Corporate Income Tax Law (Law 27/2014), which introduced the possibility of monetising the deduction, even if there is no tax liability, by accepting a 20% reduction in the amount.
These advantages, together with the purely technical and strategic advantages obtained by companies that are committed to R&D to improve their competitiveness, mean that business spending on R&D continues to increase year after year, as can be seen in the data provided by the National Statistics Institute (INE). Expenditure on internal R&D reached 14,946 million euros in 2018, which represents 1.24% of Gross Domestic Product (GDP) and represents an increase of 3% over the previous year.
In order to provide companies with greater legal certainty regarding the tax deductions generated and/or applied, the Ministry of Science, Innovation and Universities offers taxpayers the possibility of obtaining a Binding Motivated Report (IMV), which certifies the tax qualification associated with a project.
At Euro-funding we have been helping companies to obtain public funding for their R&D&I projects for more than 20 years, serving more than 1,300 clients and managing funding applications for 35,000 projects. In the field of tax deductions, our client portfolio includes from some of the main Spanish companies in the Ibex-35 to small start-ups, covering a wide range of sectors such as automotive, pharmaceuticals, construction, energy, aeronautics, information and communications technologies, manufacturing and agri-food, among others.
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