Do you consider your company as innovative? Are you taking advantage of all the financing possibilities or tax level benefits that are available to you? Are you going to use these deductions on Corporation Tax at the closure of your annual accounts?
In our country, tax deductions for R+D+i are some of the most powerful in the European Union, and were introduced into Spanish legislation in 1997, although they have been amended and changed over time. Some cornerstones include the 2003 introduction of Motivational Binding Reports in the face of the insecurity arising from the application of the deductions and the more recent introduction (2013) of the possibility to request cash back on said deductions.
In this respect, the Spanish tax deduction system for R+D+i currently permits up to 42% of direct costs for deductible projects. These tax deductions have the following advantages:
- They have economic affects tantamount to those of subsidisation but are not taxed.
- They are applicable to all types and sizes of company.
- These deductions are not subject to competitivity, and function in accordance with the definitions established in the Corporation Tax Law.
- The generation of tax deductions is proportional to the R+D+i activities carried out, and applies to the annual payment of Corporation Tax, up to a limit of 50% in some cases. Furthermore, the deduction generated but not applied can be employed to previous tax years and it is even possible to get cash back on deductions pending application.
Despite this important, historic change, the application of these incentives is not currently a tool that is taken advantage of and optimized by the majority of companies in our country. It is estimated that over 20% of businesses that are eligible for tax deductions due to R+D+i are not taking advantage of the tool.
If we focus on our country’s SMEs, which represent roughly 90% of Spain’s business sector, the application of these incentives is few and far between due to a lack of knowledge of how to use these tools, as well as the reality that they have less resources and personnel who are dedicated to these types of tasks in comparison to larger businesses.
Nevertheless, almost 50% of Innovation costs in Spain are made by small and medium-sized companies. Therefore, it is safe to say that the general trend among these companies is not that they are hesitant in taking on new technological challenges and opportunities which help to improve their positioning in today’s demanding, globalized market. Benefiting from public financing tools and tax incentives can help the innovative efforts of these companies and improve the speed and application of their innovative projects.
Among those activities which are considered as deductible and which can lead to tax benefits are a variety of daily activities which are carried out by a large amount of INNOVATING Spanish SMEs:
- Efforts in the improvement of knowledge and the understanding of technologies applied to the sector.
- Activities related to the launch of new products and services on the market, as well as the search for the continuous improvement of internal work processes.
- In relation to the point above, advances in related technology or substantial improvements to products or services that the company already offers shall also be deductible.
- The manufacture of testing and demonstrative prototypes.
- Software development, whether in full or partial, by the use of new algorithms, programming activities or applications.
Iplusf, with over 30 years of experience, is a firm that specialises in the awarding of public finance and tax incentives for projects and business investments in all sectors, with a high rate of success. Thanks to a multidiscipline team of qualified engineers with a wide variety of experience in different sectors and with different technologies, Iplusf understands, analyses and optimizes our clients’ projects via a prime combination of financing tools and tax incentives.