The new Corporate Tax Law introduced a modification in the tax incentive for the transfer of certain intangible assets developed by the company, commonly called “Patent Box “”, this type of incentives were introduced for the first time in Spanish legislation, in 2007, in order to be equated with other EU countries that long ago used this type of incentive to reward innovation and promote the identification of companies in the exploitation of both the value of their intellectual property, and its possible transfer to third parties.
This incentive, whose calculation modification will enter into force on July 1, 2016, will be applied to the amount obtained by the income from the transfer of the right of use or exploitation of certain intangible assets valued by the Law itself, considering:
- Including: patents, designs, plans, formulas or secret procedures, rights in information relating to industrial, commercial or scientific experience.
- Not including others such as: transfer of trademarks, literary, artistic or scientific works, including cinematographic films, of personal rights susceptible of assignment, such as image rights, computer programs, industrial, commercial or scientific equipment.
The approved incentive that will enter into force in July 2016, has introduced an alteration in the calculation system in order to favor the obtaining of a higher value in the amount to be reduced from the tax base. If to date the incentive consisted of applying as a taxable base only 40% of the amount of the assignments, the current system determines that a reduction of 60% of the taxable base resulting from applying a coefficient to the amount of income from the transfer of certain intangible assets, that is, first the coefficient is applied to the income obtained from the transfer of assets, and the result of the operation is applied the reduction of 60%.
Calculation of the coefficient to be applied to the income obtained by the assignment of some intangible rights.
For the calculation of the coefficient, an operation must be carried out to divide two figures from the expenses incurred by the transferring company in relation to the creation of the intangible asset. Article 23 of the Companies Law in its section 1 defines which figures we must include as concepts of numerator and denominator in that operation, in order to obtain the coefficient.
- Numerator: the expenses incurred by the transferring entity directly related to the creation of the asset, including those derived from subcontracting with third parties not related to it. It must be increased by 30%, without the resulting amount being in any case higher than the amount of the denominator.
- Denominator: the expenses incurred by the transferring entity directly related to the creation of the asset, including those arising from the subcontracting and, where appropriate, the acquisition of the asset.
For the calculation of the values to be introduced in the operation, financial expenses, amortizations of real estate or other expenses not directly related to the creation of the intangible asset must not be incorporated.
Limitations on the implementation of the 60% reduction.
Likewise, the Law establishes a limitation when applying the reduction of 60, this will only apply to those assignments of intangible assets that have not been made between related entities; having to understand as such, those included in article 18.2 of the Corporate Tax Law, which among others establishes as operations between related entities those in which they act:
- Two entities belonging to a group.
- An entity and another entity indirectly owned by the former in at least 25% of the share capital or own funds.
- An entity resident in Spanish territory and its permanent establishments abroad.
Requirements for the application of the reduction.
It is worth remembering the necessary requirements to apply this reduction, which were already being applied prior to the last amendment of the Companies Law, and which continue to remain in force as of July 2016.
- That the assignee, when using the rights of use or exploitation, does not do so based on the delivery of goods or services that generate tax-deductible expenses to the assignor.
- That the assignee does not reside in a tax haven.
- In cases where the transfer of assets includes ancillary services, these must be completely differentiated in the transfer contract.
- That the entity has the necessary accounting records to be able to determine the direct income and expenses corresponding to the assets subject to assignment.
Application of incentives
The tax incentives for the assignments of the right of use or exploitation of intangible assets, which have already gone through 3 alterations since their first inclusion in 2007, continue to be applied depending on at what time the assignment was made, in this way in accordance with the transitional provisions of the Law, it will be necessary to be at the date on which the assignment was made to know which incentive corresponds to apply:
- Those made from July 4, 2007, until the entry into force of Law 14/2013 of September 27, the incentive will consist of the integration into the tax base of 50% of the amount of the assignments
- Those made from the entry into force of Law 14/2013 until June 30, 2016,may choose to apply in all tax periods that remain until the end of the corresponding contracts, the incentive to only apply 40% of the amount of the assignments.
- As of July 1, 2016, the last approved system of reducing 60% to the result obtained from a coefficient calculated based on the expenses related to the assignment will be used.
Finally, the Law provides for a unification of the calculation system, being from June 30, 2021 when all assignments that have been made, regardless of the date, must apply the regime that will enter into force on July 1, 2016.