B Law & Tax
15 November 2023

Tax advisor: Tax Challenges in R&D: Change of Criteria and Legal Hopes

Until mid-2022, the General Directorate of Taxes (DGT) allowed corporate income tax (CIT) payers to declare R&D tax deductions in a self-assessment, even if they had not been included in previous fiscal periods in which they were generated. However, starting in June 2022, the DGT changed its stance, limiting the application of deductions to the amounts included in self-assessments of the generating periods. This meant that taxpayers had to challenge their non-prescribed self-assessments from previous years to validly recognize the generated deductions.

In October 2023, the Supreme Court (TS) rejected an appeal in cassation by the State Attorney’s Office against a judgment of the National Court that recognized a taxpayer’s right to apply R&D tax deductions in the self-assessment, even if they were included for the first time in the exercise but were generated in previous periods. Although this aspect was not decisive, the TS identified the relationship between responses to queries and the case examined as key. The judgment did not directly address whether it is necessary to include deduction amounts in self-assessments of generating years beforehand.

The TS concluded that there is substantial identity between responses to queries and the case, allowing the application of R&D tax deductions in subsequent fiscal years. The decision highlights contradictions in the position of the State Attorney’s Office, which sought to exclude expenses accrued in previous years not included in self-assessments, despite accepting exceptions. The controversy persists after the doctrinal change by the DGT in 2022, and a specific pronouncement is expected on whether it is necessary to include amounts in self-assessments given the “singularity and characteristics of the regulation” mentioned by the TS.

In summary

Although the judgment raises some doubts about the recent change in the DGT’s criteria and provides some hope for the taxpayer, we believe that the dispute arising from the criteria modification resulting from the consultations in June 2022 has not yet been definitively resolved. It’s worth noting that the criteria of the binding consultations on this matter differ from June 24, 2022, compared to those applied in the fiscal periods referred to in the TS judgment under analysis. We anticipate a specific pronouncement on the necessity of including amounts in self-assessments as an essential requirement for the deduction of R&D expenses, especially considering the reference in the TS judgment to the “singularity and characteristics of the regulation” governing the recognition of these deductions.



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