B. Deduction for technological innovation activities (art. 35.2 LIS)

Concept of technological innovation

Technological innovation is considered to be any activity that results in a technological advance in obtaining new products or production processes or substantial improvements to existing ones. 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 materialisation 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.

Deduction base

The basis for the deduction will be the amount of expenses incurred by the taxpayer as long as they are directly related to technological innovation activities, are effectively applied to their implementation and are specifically individualized by project.

The technological innovation expenses that form the basis of the deduction must correspond to activities carried out in Spain or in any Member State of the European Union or the European Economic Area.

Likewise, amounts paid for the performance of such activities in Spain or in any Member State of the European Union or the European Economic Area, on behalf of the taxpayer, individually or in collaboration with other entities, will be considered technological innovation expenses.

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.

Percentage of deduction

In this case, the deduction percentage will be 12 per 100 of the expenses incurred in the tax period for this concept.

However, for expenses incurred on projects started on or after June 25, 2020, consisting of the performance of technological innovation activities the result of which is a technological advance in obtaining new production processes in the value chain of the automotive industry or substantial improvements to existing ones, in the manner established in art. 7 of Royal Decree-Law 23/2020, of June 23, as amended by Final Provision 8.1 of Royal Decree-Law 34/2020, of November , an increase in the deduction of 38 percentage points is established (up to 50 percent of these expenses .  This increase may be applied by those taxpayers who are considered small and medium-sized companies in accordance with the provisions of Annex I to Commission Regulation (EU) No. 651/2014, of June 17, 2014, by which certain categories of aid are declared compatible with the internal market in application of articles 107 and 108 of the Treaty ( OJ L 187 of 26-06-2014. In the case of taxpayers who do not have such consideration, the expected increase will be 3 percentage points . 

Additionally, for the application of the indicated increase the following will be taken into account:

1. The conditions provided for in Chapter I and in Article 29 must be met, except as regards the basis of the deduction, of Commission Regulation (EU) No. 651/2014, of June 17, 2014, by which declares certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty.

2.  It will be necessary for the entity to have obtained a reasoned report on the qualification of the activity as technological innovation whose result is a technological advance in obtaining new processes or substantial improvements to existing ones, in the terms established in letter a) of section 4 of article 35 of the LIS .