In Spain, companies that develop research, development, and innovation (R&D) projects can access
significant tax incentives. These benefits are designed to reward companies that invest in innovation, as
mentioned by Pablo Mallo in his Tax Pill from last February, where he explains how to take advantage of
these incentives according to current legislation.
Reduction in Social Security Contributions
One of the main advantages for companies involved in R&D projects is the reduction of up to 40% in
Social Security contributions for employees working on these projects. This incentive alleviates labor
costs and makes it easier for companies to strengthen their research and development teams.
Tax Deduction on Corporate Tax
In addition to the reduction in Social Security contributions, companies are entitled to deduct up to 42%
of expenses related to R&D in Corporate Tax. This deduction applies to expenses related to research,
development, and technological innovation, including salaries, materials, equipment, and other
necessary expenses to carry out these projects.
Spanish legislation establishes that companies investing in R&D can deduct a percentage of their
expenses. For research and development expenses, the deduction is 25%, with a possible increase to
42% if a certain threshold of investment in previous years is exceeded. An additional 17% deduction is
also available for expenses related to personnel exclusively assigned to R&D activities.
Applicable Legislation
The R&D deduction is primarily regulated in Article 35 of the Corporate Tax Law, which establishes the
conditions and applicable percentages for research, development, and technological innovation activities.
This law defines the activities that fall within the scope of R&D and sets the limits and criteria for
accessing the deductions.
In addition to the LIS, the Corporate Tax Regulation also plays a crucial role in the practical application of
these deductions. The regulation details how expenses should be presented, the conditions for an
activity to be considered as research or development, and the procedures for applying for tax benefits.
It is important to note that to apply for the R&D deduction, companies must meet certain formal
requirements, such as submitting a favorable report from the Ministry of Economy and Competitiveness.
This report certifies that the activities carried out are indeed research, development, or technological
innovation and not activities outside the scope of the deduction, such as industrial production or the
distribution of goods and services.
Who Can Apply for the R&D Deduction?
The deduction is available to all Corporate Tax taxpayers who carry out research, development, and
technological innovation activities. This includes commercial entities, civil societies with a commercial
purpose, foundations, associations, temporary business unions, among others. Even investment entities
such as pension funds or venture capital funds can access these deductions if they meet the legal
requirements.
Conclusion
Companies involved in R&D projects in Spain can benefit from significant tax incentives, such as
reductions in Social Security contributions and tax deductions in Corporate Tax. These benefits are
designed to encourage investment in innovation and allow companies to continue developing new
products, services, and processes that enhance their competitiveness.
To access these deductions, it is essential to meet the requirements set out in the Corporate Tax Law
and its development regulation. Companies must ensure that the activities they carry out fit within the
legal criteria for R&D and, if in doubt, seek advice from an expert in the field.
For any inquiries, please don’t hesitate to contact MDG Advisors. We will be happy to assist you
in optimizing your access to these tax benefits.
Sandra Gámez Chaves