“As a rule, start-ups do not have a positive share of corporate income tax, either because they do not yet grant any concessions or because they have negative assessment bases from previous years to compensate. In the early years, you tend to be more focused on investing in growing businesses, so it’s not common to generate credit to pay that tax that’s levied on profits,” he says. Manuel RuizCEO of Nubica Advice.
Also in these cases, according to this expert, tax deductions for R&D&I can be very interesting for several reasons:
1. The company has 18 years to apply the deductions
For this reason, “many are interested in generating a ‘tax credit’ in the present to reduce corporate tax payments on benefits and positive quotas in the future. If there are medium-term growth prospects, it can be interesting to address this incentive in advance. Additionally, this incentive allows you to recoup expenses from previous years, even from the year the startup was founded.”
two. This deduction can be activated on the balance
Depending on the situation of each company, “this deduction may be applicable to the balance sheet in some cases. It recognizes an asset that increases the value of the business, such as an unapplied tax credit. Normally this mechanism can be done in companies that have achieved this break even are operational and have prospects of being able to “use up” these deductions in a reasonable period of time”.
3. The deduction can be monetized
As Ruiz explains, “part of the deduction can be turned into a subsidy that demands its payment if the quota is insufficient. To use this mechanism, The company must meet certain conditions. In this way, a direct benefit can be derived from the tax deduction, even if there is no prospect of generating positive quotas in the medium term. Many startups are already doing this and therefore generate a recurring ‘grant’ every year to recoup some of their operational costs.”
Four. The well-founded report makes it possible to obtain the seal for innovative medium-sized companies
This seal, Ruiz recalls, accredits “innovative SMEs” so that they can enjoy certain benefits, such as compatibility of the Bonuses in social security contributions and R&D&I tax deductions for the same employees in the same period.
«One of the ways to obtain the label is to obtain a substantiated report as a mechanism to ensure tax deductions for R&D&I (previous certification of activities by ENAC). This insurance mechanism is not mandatory for the application of this tax incentive, although it is mandatory to monetize the deduction.
Obtaining the innovative SME label and the reasoned report – stresses Ruiz – is free, “but the ENAC certification required as a previous step can cost between 2,500 and 3,500 euros. Therefore, the company must consider whether it is worth taking on these costs.
5. The ENAC certificate as a trading tool and for investors
In line with the previous point, “the assurance mechanism consisting of the ENAC certification of the company’s activities leads to the issuance of a certificate and diploma certifying that the company carries out R&D&I. These types of certificates are sometimes used as a tool to differentiate from the competition or to add value to the company, for example when new investors come on board.
6. The ENAC certificate to justify the capitalization of R&D expenses
The ENAC certificate, which supports the tax deduction in case of compliance with this insurance mechanism, can also be used to support the criteria for capitalizing R&D expenditure in companies, “since these certificates provide a technical assessment of the projects and an economic audit of the associated effort. This applies mainly to research and development projects, less so to technological innovation projects».