8.4.3.2 2019: 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, in the footwear, tanning, leather goods, toy, furniture and wood industries, provided that they cannot be converted or used for industrial applications or for commercial exploitation.

The implementation of technological innovation activities, according to the concept just mentioned, 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 ISO 9000 series, GMP or similar, not including the costs corresponding to the implementation of said standards.

Technological innovation expenses are considered to be those incurred by the taxpayer as long as they are directly related to said activities and are effectively applied to their performance, being specifically individualized by project.

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.

Deduction percentage for the 2019 fiscal year

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

Exclusions from the concept of research and development and technological innovation

Activities consisting of:

1. Activities that do not involve significant scientific or technological innovation, 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 for textile samples and those of the footwear, tanning, leather goods, toy, furniture and wood industries

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

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

   • planning of productive activity: the preparation and start of production, including the setting of tools and other activities other than those described in letter b) “Basis of the 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 research and market research

   • the establishment of networks or facilities for marketing

   • the training and development of personnel related to such activities.

3. The exploration, survey, or prospecting of 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 liquidations of the tax periods that end in the next eighteen years.

Application and interpretation of the deduction

In order to apply this deduction, the taxpayer may provide a reasoned report issued by the Ministry of Economy and Competitiveness, or by an agency attached to it, regarding compliance with the scientific and technological requirements set forth 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 the provisions of article 35.3 of the LIS. This report, issued under the terms established in RD 1432/2003, of November 21 ( BOE of the 29th), will be binding on the tax authorities. 

The taxpayer may also submit queries regarding the interpretation and application of this deduction, the response to which will be binding on the tax authorities, in accordance with the terms set out in articles 88 and 89 of Law 58/2003, of 17 December, General Tax Law.

Likewise, for the purposes of applying this deduction, the taxpayer may request the tax authorities 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.