Tax incentives for startups, research and innovation

Key rules

• Who it is for: The R&D&i credit and patent box are company tax breaks, not personal income tax breaks.
• Patent box: Trademarks and other marketing assets are excluded from the 60% reduction.
• Startup rate: A certified startup pays 15% instead of 25% for the first profitable year and the next three.
• Startup certification: You must get certification through ENISA before you can use the startup benefits.

Which breaks exist

Three breaks can reduce company tax if you meet specific conditions: a credit for research, development and innovation (R&D&i), the patent box, and the benefits for certified startups. They apply to companies paying Spanish corporate income tax. They do not apply to personal income tax, except the startup benefits for founders, employees and investors described below.

R&D&i credit

The credit comes off the tax you owe. It works like this:

• Research and development (R&D): 25% of the year's R&D spending, plus 17% on the part above the average of the previous two years. If that excess is more than 50% of the average, the rate on it is 50%.
• Extra amounts: a further 17% on pay for qualified researchers, and 8% on investment in equipment and other fixed assets (not buildings or land).
• Technological innovation: 12% of qualifying spending.
• Annual limit: the credit can cover up to 25% of your gross tax bill, or 50% if R&D&i spending is over 10% of that bill.
• Unused credit: carry it forward 15 years, or 18 years for R&D.

If you cannot use the credit because of the limit, you can ask for cash instead, with a 20% reduction. There is a yearly cap, currently around 3 million euros, and conditions on minimum staff spending and keeping jobs.

You can ask for a binding report from the state authorities on whether your project counts as R&D&i. It gives you legal certainty before you claim.

Patent box

Net income from selling or licensing certain intangible assets gets a 60% cut in the taxable amount. Qualifying assets include patents, utility models, supplementary protection certificates and registered software.

• The cut is scaled by the share of qualifying R&D spending in total spending, with an uplift of up to 30% on qualifying spending.
• Your company must have created the asset at least in part.
• The buyer or licensee must not be in a tax haven.
• You must keep separate accounts for each asset.
• Trademarks and similar marketing assets are excluded.

You can ask the tax authority for an advance valuation agreement (acuerdo previo de valoración) to settle the method before you rely on it.

Startup-law benefits

A certified startup gets:

• A 15% company tax rate instead of 25%, for the first year with positive taxable income and the next three.
• Deferral of tax debt for the first two years, with no guarantee, interest or fee.
• Exemption from quarterly payments on account.

Founders, employees and investors also benefit. Stock options are exempt up to 50,000 euros a year, tax on options can be deferred until you can sell, and investors get a higher personal income tax deduction.

Do you qualify?

Your company must:

• Be new, or no more than 5 years old (7 for biotech and certain other sectors).
• Not be listed, not come from a merger or split, and not pay dividends.
• Have its head office in Spain, with most staff or work in Spain, and at least 60% of staff in Spain.
• Be innovative, with a scalable business model.

You apply to ENISA, the state innovation company, through its online platform with a business plan. It issues a report, and the certification lasts up to 7 years.

What to do next

Work out which of the three fit your activity. Keep records of R&D&i spending by project, and talk to an adviser before you claim, because rules and caps are set by law and change. The questions below cover cash refunds, trademarks, company age and founders.

Frequently asked questions

Can I get cash back if my company cannot use its R&D credit?

Yes, a company that cannot use its R&D credit because of the cap can claim a cash refund of the unused amount, but it loses 20% of it. The refund has a yearly ceiling, currently around 3 million euros, and requires minimum staff spending and keeping jobs. Otherwise, unused credits carry forward for 15 years, or 18 years for R&D.

Does the patent box cover income from a trademark?

No, the patent box excludes marketing intangibles such as trademarks. It covers income from transferring or licensing patents, utility models, registered software and similar assets, with a 60% reduction on the qualifying share of net income. You must keep separate accounts for each asset, and the buyer or licensee cannot be in a tax haven.

How old can my company be to qualify as a startup?

Your company must be within 5 years of incorporation, or 7 years for biotech and certain other sectors. It must also be unlisted, innovative and scalable, based in Spain, and employ at least 60% of its staff in Spain.

Do startup benefits reach founders and employees as well as the company?

Yes, founders, employees and investors also get personal tax benefits under the startup rules. Stock options are exempt up to 50,000 euros per year, with tax on options deferred until there is liquidity.