Motivated Report, a guarantee of success for tax deductions
The Binding Reasoned Report is a tool available to companies to maximise legal certainty in the application of deductions and allowances for their R&D&I projects.
In this regard, our R&D&I Taxation team provides its services, from the application to the issuance of the Reasoned Report, with a success rate of over 97%.
The expenditure that Spanish companies assume in relation to their Research, Development and Innovation activities can lead to a reduction in the amount of Corporate Income Tax. For this reason, in 2003, by means of Royal Decree 1432/2003, a procedure was developed to try to guarantee companies its correct application: Informe Motivado Vinculante (IM).
This is a tool that, on a voluntary and annual basis, can be requested by companies to provide them with greater legal certainty in the application of deductions and subsidies for their R&D&I projects, since:
- They bind the State Tax Administration Agency (AEAT) in relation to the classification of the activities as R&D and/or Technological Innovation of a project or of the activities carried out within the framework of an annual period of this.
- They are linked to the Social Security in relation to researchers who meet the legally established requirements so that their employer is entitled to a rebate for them in the Social Security contribution.
Types of Reasoned Reports
Reports for tax deductions:
In general, the request for reasoned reports is voluntary, although, once issued, their content is binding. They can be ex ante (a priori), i.e. an IM is issued for the entire project before it starts, or ex post (a posteriori), i.e. an IM is issued for each fiscal year of the project carried out.
- IM type A:
- Content and first implementation technical report: includes the assessment of the project according to its technical nature, formal aspects, expenditure incurred and its coherence.
- Technical monitoring report: assesses the annual implementation of a project planned for several years.
- IM type B and C:
- Technical report with ex-ante content: Evaluation of a project prior to its implementation. It allows companies to have a guarantee of the tax deductions for which they are eligible before starting the project.
Reports for Social Security subsidies:
On the other hand, the reports for Social Security are ex post and voluntary, except if the entity has granted ten or more subsidies to researchers over three months or more in one financial year, in which case the entity must submit an IM to the General Treasury of the Social Security within a maximum period of six months from the end of the tax year in which the subsidies have been applied.
- IM Type D: acredits which persons are exclusively dedicated to R&D&I tasks in the company.
VMI applications in 2020
Last February, the Ministry of Science and Innovation (MCIN) presented the report of applications for 2020 IM, which corresponds to the fiscal year 2019.
In the 17th year of application of this instrument, and as has been the case in recent years, there has been an increase of almost 5% in the number of applications submitted compared to the previous year, reaching 9,606, compared to the 9,183 applications submitted in 2019.
The average expenditure on R&D projects (€470K) and Technological Innovation projects (€1,014K) has also increased for yet another year, as has the number of applicant companies. It is particularly noteworthy in this regard that the balance between SMEs and large applicant companies is increasingly shifting towards SMEs, with 61% and 39% respectively. However, this contrasts with the analysis from the point of view of the size of the projects: during the fiscal year 2019, only one SME requested a IM for projects of more than €10M and seven did so for projects of between €5M and €10M.
Furthermore, the report shows that the deduction for R&D&I activities is considered to be one of the main ways to encourage business innovation. Moreover, according to the OECD’s 2019 report, “The effects of T&D tax incentives and their role in the innovation policy mix”, the effects of tax incentives translate, among others, into more companies starting to invest in R&D&I, as well as more jobs related to these activities.
How can we help you?
As shown in the analysis of requests for IM in 2020, the acceptance rate of these requests is 97.5%. This remarkable figure is possible, in large part, thanks to the important role played by consultancy firms such as ours.
Our R&D&I Taxation team works to support our clients, from the application to the issuance of the report, having achieved a success rate even higher than the above-mentioned average published by the MCIN.
We focus not only on obtaining the maximum qualification and accepted expenditure, but also on the maximum reduction of uncertainty in order to try to guarantee, as far as possible, a good result in the issuing of the Reasoned Report.
Our work and advice, together with the work of the certifying body (supervised by ENAC) and that of the Ministry of Science and Innovation itself, which reviews each and every one of the files, represents a triple filter to guarantee the coherence and objectivity of each application to the Tax Administration and, therefore, the success of the procedure.
