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Form 200. Corporate Income Tax Declaration 2018

8.4.3.1 2018: Research and Development (CT)

Consideration of research and development activities

In accordance with the provisions of article 35 LIS research will be considered to be an original and planned investigation that seeks to discover new knowledge and a superior understanding in the scientific or technological field.

Development will be considered the application of research results or any other type of scientific knowledge for the manufacture of new materials or products or for the design of new processes or production systems, as well as for the substantial technological improvement of materials, pre-existing products, processes or systems.

The materialization of new products or processes in a plan, scheme or design will also be considered a research and development activity, as well as the creation of a first non-marketable prototype and initial demonstration projects or pilot projects, provided that they cannot be converted or used for industrial applications or for commercial exploitation.

Likewise, the design and preparation of samples for the launch of new products, as well as the conception of advanced "software", will be considered a research and development activity, provided that it represents significant scientific or technological progress through the development of new theorems and algorithms or operating systems, languages, interfaces and applications intended for the development of new or substantially improved products, processes or services. Software designed to facilitate access to information society services for people with disabilities fall under this concept when they are carried out not for profit. Standard or routine activities related to software maintenance and minor updates are not included.

Carrying out any of these activities will give the right to make a deduction from the full fee under the following conditions:

Deduction base

The basis of the deduction will be the amount of research and development expenses and, where applicable, investments in tangible and intangible assets, excluding real estate and land.

Research and development expenses will be considered to be those incurred by the taxpayer, including the depreciation of assets used for the aforementioned activities, as long as they are directly related to said activities and are effectively applied to their execution, and are specifically individualized by projects.

The base of the deduction will be reduced by the amount of the subsidies received to promote said activities, and are taxed as income during the tax period.

The investments will be understood to have been made when the capital assets are put into operating condition.

Therefore, only those expenses that are directly attributable to the research and development project will form part of the base of the deduction, and said deduction cannot be applied to indirect expenses (as is the case of financial expenses, those of the general structure of the company, among others), nor on all those who, despite having a direct relationship with the aforementioned activity, are not susceptible to individualization, or if said distribution has not been carried out. Therefore, for the adequate individualization by projects of the direct expenses incurred in each of them, the specification of the concepts and their amounts is required.

(Consultation DGT V0108-09).

b) Deduction percentages applicable in fiscal year 2018.

  • In general , 25 percent of the expenses incurred in the tax period will be applied for this concept.

    In the event that the expenses incurred in carrying out research and development activities in the tax period are greater than the average of those incurred in the previous two years, 25 percent will be applied up to said average, and 42 percent about the excess with respect to it.

    Additionally , a deduction of 17 percent of the amount of the entity's personnel expenses corresponding to qualified researchers assigned exclusively to research and development activities may be made.

  • A deduction of 8 percent may also be applied on investments in elements of tangible and intangible assets, excluding buildings and land, provided that they are exclusively used for research and development activities.

    Likewise, it is required that the elements in which the investment is materialized must remain in the taxpayer's assets, except for justified losses, until they fulfill their specific purpose in research and development activities, except that their useful life in accordance with the amortization method, admitted in letter a) of article 12.1 of the LIS, which applies, is lower.