B Law & Tax
19 April 2023

Tax Advisor: Corporate Tax Deductions for R&D&I Projects

When an investment is made or expenses are incurred for the purpose of developing the economic activity of a company, there may be deductions in the amount of tax payable. That is why there are tax deductions in the Corporate Tax for R&D&I projects.

The tax deduction can be seen as an indirect form of financing, since it reduces the amount to be paid in Corporate Tax due to expenses in research, development and innovation activities. This deduction is adjusted to the economic situation of the company, allowing to obtain a direct return through cash back or “monetization”, which is particularly useful for technology companies, even if they do not make a profit.

Corporate Tax deductions for R&D&I projects carried out with public aid can be applied to any type of company. It does not matter the size, the turnover or the sector of the company. It is enough that it is based on an improvement for the company.

Corporate Tax allows deductions to be applied up to 18 years after the end of the tax period in which they were generated. In addition, the deadline can be postponed until the first year in which positive results are obtained in two cases: if it is a newly created entity or if it is an entity that recovers losses from previous years through the contribution of new resources.

The applicable deduction to expenses related to R&D&I activities varies according to the magnitude of the challenges faced by the project and the level of progress achieved. In research and development, the percentage of substantial improvement at the sectoral level is from 25% to 42% of the project budget; in technological innovation, the deduction percentage is 12% of the project budget.

Tax deductions for R&D&I activities are applied to the full amount of corporate Tax but are limited to 25% of such amount. However, if the deduction is generated during the same fiscal year as the tax, then the limit increases to 50%.

B Law & Tax International Tax & Legal Advisors.


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