Skip to main content
Practical Handbook for Companies 2021

Deduction rates

The applicable deduction percentage shall be 12 per cent of the expenses incurred in the tax period for this concept.

With effect for tax periods beginning in 2020 and 2021, Article 7 of Royal Decree-Law 23/2020, of 23 June, approving measures in the field of energy and other areas for economic reactivation, in the wording given by the eighth final provision of Royal Decree-Law 34/2020, of 17 November, on urgent measures to support business solvency and the energy sector, and in tax matters, increases the percentage of the deduction for technological innovation activities referred to in Article 35.2(c) of the LIS, by 38 percentage points for expenditure incurred on projects begun on or after 25 June 2020 consisting of technological innovation activities resulting in a xml-ph-0007

This increase of 38 per cent may be applied by taxpayers that qualify as small and medium-sized enterprises in accordance with Annex I of Commission Regulation (EU) No 651/2014 of 17 June 2021 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty.In the case of taxpayers who are not considered as such, the increase foreseen will be 3 percentage points, provided that the requirements set out in the regulation are met, in terms of collaboration and assumption of expenses by small and medium-sized enterprises.

Consequently, according to the above rules, an increased deduction percentage will be applied to small and medium-sized enterprises at 50 per cent and to enterprises which do not have such status, the increased deduction percentage will be applied at 15 per cent.

The amount of the deduction corresponding to the increase provided for in this article may not exceed 7.5 million euros for each project developed by the taxpayer.In addition, the amount of the aforementioned deduction, together with the other aid received by the taxpayer, may not exceed 50 per cent of the cost of the project that has been subsidised, or 15 per cent in the case of taxpayers that are not considered small or medium-sized enterprises in accordance with the provisions of Annex I of Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty.

Likewise, for the application of this deduction, in addition to the entity having obtained a reasoned report on the classification of the activity as a technological innovation whose result is a technological advance in obtaining new production processes in the value chain of the automotive industry or substantial improvements to existing ones, under the terms established in letter a) of Article 35.4 of the LIS, the conditions set out in Chapter I and Article 29 must be met, except in relation to the deduction base of the aforementioned Commission Regulation (EU) No. 651/2014.