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Practical Manual of Companies 2023.

Research and development activities (article 35.1 of the LIS)

a. Research and development concept

  • research will be considered to be the original planned inquiry that seeks to discover new knowledge and a superior understanding in the scientific and technological field, and development to the application of the results of the research 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 pre-existing materials, products, processes or systems.

  • research and development activity will be considered :

    • The materialization of new products or processes in a plan, scheme or design, 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 commercial exploitation.

    • The design and preparation of the sample book for the launch of new products . For these purposes, the launch of a new product will be understood as its introduction into the market and as a new product, one whose novelty is essential and not merely formal or accidental.

    • The creation, combination and configuration of advanced software , through 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.

b. Deduction base

The basis of the deduction will be the amount of the research and development expenses and, where applicable, the investments in tangible and intangible assets , excluding buildings 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 deduction base, 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 that, 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 proper individualization by projects of the direct expenses incurred in each of them, the concepts and amounts thereof must be specified.

c. Deduction percentages

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

    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 on the excess with respect to this.

    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 of investments in elements of tangible and intangible assets may also be applied, 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 its useful life according to the amortization method, admitted in letter a) of article 12.1 of the LIS , which applies, was shorter.