Deductions for R&D and technological innovation expenses, and for environmental investments, in the Spanish Corporate Income Tax
The Spanish Corporate Income Tax includes a deduction for expenses on R&D and technological innovation (R&D&I) and a deduction for environmental investments. This report focuses on the environmental effects of the R&D&I deduction and on the effects on innovation of the environmental investments deduction.
The R&D&I deduction applies to expenditures – both current and capital – incurred on R&D and technological innovation, whereas the environmental investments deduction benefits investments devoted to avoiding air pollution from industrial facilities, prevent water pollution and reduce, recover or adequately treat industrial waste. It also benefits purchases of new land-based means of transportation for commercial or industrial use and some investments for the use of renewable energy sources.
Even if the amount deducted has been generally increasing in absolute terms for the last years for both deductions, they are used by a limited number of companies. Their importance is relatively low in terms of the percentage of the total revenue raised by the Corporate Income Tax, and slightly declining. For both deductions, the percentage of companies making use of them grows as their size increases, along with the average size of the deductions. The average deduction for R&D&I is higher, whereas the number of applicants is slightly lower. However, the scope of the environmental investments deduction is significant and, for 2005, it was estimated that most of the investment in environmental protection undertaken in Spain was supported by the tax credit.
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