Deductions for R&D&I from previous years, free of complementary tax returns.
In June 2022, the Directorate General of Taxes (DGT) modified the criteria for the application of R&D&I tax deductions for projects carried out in previous years, establishing as an obligation for companies to file a supplementary tax return for the year in which the projects were carried out in order to be able to apply them.
Now, a Supreme Court ruling changes course, supporting the use of R&D&I deductions from previous years without the need to file supplementary tax returns. This decision provides even greater guarantees and legal certainty to companies.
R&D&I tax deductions are one of the most useful and practical incentives in the catalog of public aid. Regulated in Law 27/2014 on Corporate Income Tax and in Royal Decree 1432/2003, they allow between 12% and 42% of the amount of the projects carried out to be deducted, thus reducing the net amount that companies must pay in corporate income tax. In certain cases, companies can even charge to their current account the excess of the deduction that exceeds the tax payable. These deductions for R&D&I can be applied in the year in which they are generated or in the following 18 years (for example, if the company has no liquid quota and does not meet the requirements for the tax authorities to reimburse the surplus). The projects can be large disruptive developments, but also small innovative advances within the process of continuous improvement of the company, creation of new products, or contracting of technological centers to solve the company’s problems, for example.
In addition, the application of the incentive is a guarantee for the companies, since there is a procedure to certify both the R&D&I nature of the projects and their amount, obtained a Motivated Report from the Ministry of Science and Innovation, which is binding for the Tax Administration. In order to give security to the system, it was accepted that companies could report and apply (in form 200) deductions for R&D&I of projects carried out in fiscal years prior to the one in which the tax return was filed. In this way, deductions from previous years could be taken advantage of, when the Binding Reasoned Report corresponding to these projects had already been obtained.
From artica+i, we help you to apply deductions for R&D&I from previous years without additional formalities
This regime was modified in June 2022 when, a few weeks before the filing of the corporate tax, the binding consultation of the Directorate General of Taxes DGT V1511-22 modified the criterion maintained until that moment. This consultation established the obligation to file a supplementary tax return for the year in which the projects that generated the R&D&I deductions were carried out in order to be able to apply them. Due to this change of criterion, many companies opted to waive the deductions of previous years, and others had to file supplementary returns with the consequent cost and management time.
Change of course and return to the previous criterion
However, the recent Supreme Court ruling 4355/2023 of October 24 has considered this DGT guideline to be incorrect and has endorsed the use of R&D&I deductions from previous years without the need to make supplementary declarations. Thus, the previous regime is returned to, with even greater guarantees, since what until now was common practice, is now Supreme Court case law. The High Court even opens the door to the use of tax deductions for R&D&I carried out in prescribed tax years (always within the last 18 years), referring the specific case of the ruling to a company that was being checked.
The Supreme Court bases this ruling on two important arguments: on the one hand, it takes into account the peculiarities of this tax incentive regime, recognizing the appropriateness of having guarantees such as the Reasoned Report before applying the R&D&I deductions, and the convenience that companies can take advantage of these deductions when they have it, even in a tax year other than the one in which the projects were carried out. On the other hand, the Supreme Court affirms that if the Treasury can review previous tax years with transcendence in which it is checking or inspecting, companies should also be able to recover tax benefits pertaining to those years.
Greater legal certainty for companies
This ruling further increases the legal certainty for companies wishing to apply this R&D&I incentive, allowing them to “rescue” deductions for R&D&I generated in recent years, without having to go through any other procedure than to include them in the next corporate income tax return.
It should be noted that, in the case of R&D projects (as opposed to innovation projects), the first year in which these incentives are applied, the deduction is 42% of the total amount of the project, which can mean a significant reduction in the tax. In subsequent years, a rebate is also applied if R&D expenditure increases, which favors growing companies, companies undergoing transformation processes, technology-based SMEs and, in general, technology-intensive companies. The possibility of recovering deductions, even in cases of tax inspections, is also good news, as it will mitigate or even completely avoid the negative impact of possible regularizations.
Likewise, in those cases in which deductions for R&D&I of previous projects are to be recovered, it is even more advisable to justify with the greatest possible solvency that the projects comply with the requirements established in the legislation, as well as that all the expenditure of the same is deductible. For this purpose, the most appropriate procedure is the aforementioned certification procedure and, if possible, obtaining a Binding Reasoned Report, being highly recommended to have the advice of a consulting firm specialized in R&D&I tax incentives.
Do you want to know more about tax deductions?
At artica+i we are experts in managing tax incentives and obtaining R&D&I deductions. Thanks to the experience accumulated in our almost 30 years and our team specialized in R&D&I taxation, we can offer a personalized service, both comprehensive and modular, to all types of companies and organizations. We are specialists in identifying R&D&I projects carried out in previous years, delimiting their scope and quantifying their amount. In addition, we have extensive experience in documentation, certification and obtaining Binding Motivated Reports for projects of all types, with one of the highest success rates in the sector.
