8.4.3.2 2018: Technological innovation (IT)

Consideration of technological innovation activities

Technological innovation is considered an activity that results in a technological advance in the acquisition of new products or production processes, or substantial improvements to those that already exist. New products or processes are considered to be those whose characteristics or applications are substantially different from those that existed previously, from a technological point of view.

This activity will include the materialization of new products or processes in a plan, scheme or design, the creation of a first non-marketable prototype, initial demonstration projects or pilot projects, including those related to animation and video games and textile samples, of the footwear, tanning, leather goods, toys, furniture and wood industries, provided that they cannot be converted or used for industrial applications or for commercial exploitation.

Carrying out technological innovation activities, according to the concept that has just been indicated, will give the right to make a deduction from the fee, under the following conditions:

Deduction base

The base of the deduction consists in the amount of the expenses during the period of technological innovation activities that correspond with the following concepts:

1. Technological diagnosis activities based around the identification, definition and orientation of advanced technological solutions, regardless of their results.

2. Industrial design and engineering for production processes, including the design and elaboration of plans, drawings and supports aimed at defining the descriptive elements, technical specifications and functioning characteristics required for the manufacturing, testing, installation and use of a product, as well as the elaboration of textile samples, in the footwear, tanning, leather goods, toys, furniture and wood industries.

3. Acquisition of advanced technology in the form of patents, licenses, know-how and designs. Amounts paid to people or entities related to the taxpayers do not give way to the right to the deduction. The base corresponding to this concept may not exceed the amount of one million euros.

4. Obtaining the certificate of compliance with the quality assurance standards of the series ISO 9000, GMP or similar, without including those expenses corresponding to the implementation of these standards.

Technological innovation expenses are considered to be those incurred by the taxpayer insofar as they are directly related to said activities and are effectively applied to their implementation, and are specifically individualized by projects.

To determine the base of the deduction, the amount of technological innovation expenses is reduced by the amount of subsidies received to develop said activities, and are taxed as income during the tax period.

b) Percentage of deduction in fiscal year 2018:

12% of the expenses incurred in the tax period for this concept. 

To consider

Research and development and technological innovation expenses are considered to be those corresponding to activities carried out in Spain or in any Member State of the European Union or the European Economic Area.

Therefore, if in relation to a research project activities are carried out in countries or territories not included in a Member State of the European Union or within the European Economic Area, the expenses incurred cannot be part of the deduction, but Yes, all expenses incurred in Spain or in one of those States, linked to said project, will be subject to deduction (Consultation DGT V0108-09).

The amounts paid to carry out said activities in Spain or in any Member State of the European Union or the European Economic Area will also be considered research and development and technological innovation expenses, at the request of the taxpayer, individually or in collaboration with other entities.

Since the same expense cannot be caused by the application of the deduction in more than one entity, the third party that physically carries out the activity on behalf of another does not have the right to said deduction.

Exclusions from the concept of research and development and technological innovation

The following activities will not be considered research and development or technological innovation activities:

1. Activities that do not involve a significant scientific or technological novelty, in particular:

   • routine efforts to improve the quality of products or processes

   • the adaptation of an existing product or production process to the specific requirements imposed by a customer

   • periodic or seasonal changes, except textile samples and the footwear, tanning, leather goods, toys, furniture and wood industries

   • aesthetic or minor modifications to existing products to differentiate them from other similar ones

2. The activities of industrial production and provision of services or distribution of goods and services, in particular:

   • planning productive activity: the preparation and start of production, including the setting of tools and those other activities other than those described in letter b) “Basis of deduction” of the section “Technological Innovation Activities”

   • the incorporation or modification of facilities, machines, equipment and systems for production that are not affected by activities classified as research and development or innovation

   • the solution of technical problems of interrupted production processes; quality control and standardization of products and processes

   • social science prospecting and market research

   • establishing networks or facilities for marketing

   • the training and formation of personnel related to said activities.

3. The exploration, drilling, or prospecting for minerals and hydrocarbons.

Deadline for application

The amounts of this deduction that could not have been applied due to insufficient quota may be applied in the settlements of the tax periods that end in the immediate and subsequent eighteen years.

Application and interpretation of the deduction

For the application of this deduction, the taxpayer may provide a reasoned report issued by the Ministry of Economy and Competitiveness, or by an organization attached to it, regarding compliance with the scientific and technological requirements required in letter a) of article 35.1 of the LIS for research and development expenses, in letter a) of article 35.2 of said Law for technological innovation expenses, taking into account in both cases what is established in article 35.3 of the LIS. This report, issued in the terms established in Royal Decree 1432/2003, of November 21 ( BOE of 29), will be binding on the Tax Administration. 

The taxpayer may also submit queries about the interpretation and application of this deduction, the response of which will be binding on the Tax Administration, in the terms provided for in articles 88 and 89 of Law 58/2003, of December 17, General Tax.

Likewise, for the purposes of applying this deduction, the taxpayer may request the Tax Administration to adopt prior agreements for the valuation of expenses and investments corresponding to research and development or technological innovation projects, in accordance with the provisions of article 91. of the General Tax Law.