CRITERIA FOR THE DEDUCTION OF R&D&i IN THE CORPORATION TAX

Entities that carry out research and development and technological innovation activities (R&D&i), both defined in articles 35.1 and 35.2 of the Corporate Income Tax Law (LIS) respectively, will be entitled to deduct 25%, 8%, and 12% of the expenses and investments related to these activities from their full tax liability, provided that such expenses have been previously evaluated by the Ministry of Economy and Competitiveness or a body affiliated with it, and comply, respectively, with the scientific and technological requirements imposed by the Spanish Tax Agency and the LIS.

In addition to the above, this tax deduction has the following specifications:

· The amount of all tax deductions applied in the same tax period to incentivize certain activities (R&D&i, job creation, film productions, etc.) cannot jointly exceed 25% of the net tax liability.

· This limit will be 50% when the amount of R&D&i and film production deductions for the current tax period exceeds 10% of the net tax liability.

Exception to the application of the 25%/50% limits.

However, there is an option to apply the R&D&i deduction without considering the above-mentioned joint limits, and in this case, this deduction can absorb the entire net tax liability. This option has the following characteristics:

· The entity must pay tax at the general or increased tax rate.

· It is a voluntary application and can be exercised in the first immediate tax period following the generation of the deduction. That is, when the tax period coincides with the calendar year, the exemption from the joint limit regarding the deductions accredited in the 2021 fiscal year can be exercised in the tax return for the 2022 period, which must be filed in July 2023.

· When choosing this option, a 20% discount must be applied to the part of the deduction that exceeds the joint limit (25% or 50%) on the net tax liability. Therefore, this option involves renouncing part of the amount of the generated deduction.