Secrets of the Spanish Patent Box and Other Tax Incentives to R&D in Spain
Spanish Patent Box (also known as “IP Box”) is a tax incentive which consists in a reduction of the taxable income generated from the license of intellectual property created or held by Spanish companies. Many European countries provide such tax benefit and in most of them the structure of the incentive is similar, although there are differences between the types of intangibles to which it applies, and in the percentage and the conditions required to be entitled to the benefit. Historically, the most advantageous Patent Box system at a European level has been Luxembourg, although the scheme is currently undergoing a thorough review, with the application of a transitional period in order to align the system to the EU and OECD standards, which require an effective link between the territory where the intangible asset is created and where they the tax incentive is received. The Spanish Patent Box, which is already adapted to these international guidelines, currently offers more certainty than other more traditional systems, including Luxembourg. Features and Benefits Spanish Patent Box consists in a 60% reduction of the net income (income – expenses) resulting from the licensing of certain intangible assets. The tax benefit is applicable when the company that generated the asset transfers or licenses it to another entity, so that the latter uses it to develop an economic activity. Intangibles to which the tax incentive applies are the following:
- Designs and models.
- Plans, secret formulas or processes.
- Rights on information concerning industrial, commercial or scientific experiences.
Under no circumstances may the income resulting from the license of the following assets benefit from the tax reduction: trademarks; literary, artistic or scientific work, including cinematographic films; image rights; software and industrial, commercial or scientific equipment.
Participation in the cost of the intangible of the transferring Spanish company Moreover, the Spanish legislation, which complies with European and OECD guidelines on the subject, expressly provides as a prerequisite for the implementation of the incentive that the transferring company contributes in at least 25% of the cost of the transferrable asset (this is known as the “Base Erosion and Profit Shifting” standard – BEPS). Other benefits of the Spanish Patent Box system
- It can be applied by any type of company and, under certain conditions, also between companies of the same group.
- It is compatible with other tax incentives and deductions for R&D, as the ones discussed below.
- It can be used regardless of the date of creation of the asset.
- It can also be applied to negative tax bases.
Other Spanish tax incentives to R&D Besides the possibility of applying the Patent Box, Spanish law allows any company that conducts R&D in Spain, or in any other Member State of the European Union, the right to practice certain deductions from Corporate Tax: Among others, companies may obtain the following tax benefits: a) On the grounds of technological innovation: Companies may deduct 12% of the expenses related to software implementation, which contribute to improving the efficiency and productivity of company processes, provided that they provide a substantial technological innovation with respect what the company had previously implemented. b) On the grounds of R&D: Companies may deduct between 25% and 42% of the average R&D expenses of the previous two years, plus an additional deduction of 17% of staff costs for qualified researchers assigned exclusively to R&D. Do not hesitate to contact us for more information on Spanish Patent Box and R&D Spanish tax incentives.