In the audiovisual sector, creativity is often front and center. This makes sense: a movie, a TV series, an animated film, or an immersive experience all stem from an idea, a story, and a specific way of telling it. But increasingly, technological development also plays a role behind the scenes of that creativity.

Rendering engines, virtual production systems, digital restoration tools, post-production process automation, volumetric capture solutions, and algorithms applied to image and sound are now part of the day-to-day operations of many audiovisual companies. And this raises an important question: Can such technological innovation qualify for favorable tax treatment?

The answer is yes, provided certain requirements are met. Tax deductions for research, development, and technological innovation (R&D&I) can be a very useful tool for production companies, animation studios, post-production companies, video game developers, and companies working on new audiovisual formats.

That said, it is important to start with a basic premise: audiovisual works are not subsidized simply because they are creative, but rather because of the genuine technological effort behind certain projects.

Technology as a Component of an Audiovisual Company's Value

The value of a company in the audiovisual sector may also lie in its intangible assets and its own technical capabilities.

As a result, proprietary rendering software, a more efficient cloud-based workflow, a digital restoration tool, or a volumetric capture system can become strategic assets. Not only do they enable companies to work more effectively and differentiate themselves from the competition, but they also help strengthen the company’s position with investors, technology partners, and financial institutions.

In this context, taxation is no longer purely an administrative matter. When managed effectively, it can help free up resources to reinvest in talent, technology, and new projects.

What Are R&D&I Tax Deductions?

Article 35 of the Corporate Income Tax Law provides for tax deductions for research and development (R&D) activities and for technological innovation (TI).

In general, R&D activities may qualify for a 25% tax deduction on eligible expenses, a percentage that may be increased under certain circumstances. Technological innovation, meanwhile, qualifies for a 12% tax deduction on expenses that meet the established requirements.

The difference between these two categories is significant. R&D is typically associated with projects involving a higher degree of scientific or technological novelty, whereas technological innovation refers to substantial advances or improvements in products or processes.

What types of audiovisual projects qualify as R&D&I?

In the audiovisual sector, there may be many projects with the potential to generate tax deductions. Some examples include:

• The development of a proprietary rendering engine or real-time processing systems.
• The development of volumetric capture systems or 3D reconstruction.
• Advanced tools for automating color grading, restoration, synchronization, and post-production processes.
• Virtual production environments that represent a substantial technological improvement over the systems previously used by the company.
• Prototypes, pilot projects, or technology demonstrators related to animation, video games, or immersive experiences. (In certain cases)

The key is to analyze each case individually. Not all digitization qualifies as R&D&I. Nor does every internal improvement or software update. The regulation excludes routine activities, ordinary maintenance, minor adjustments, standard quality control, or simply putting a product into production.

That is why, in an audiovisual project, the question should not be merely “Have we used technology?” but rather “Have we solved a real technological problem that leads to real progress for the company or, as the case may be, for the state of the art?”

Technological uncertainty: the turning point

One of the lesser-known aspects of these deductions is that the project does not necessarily have to be successful in order to qualify for the deduction.

What matters is that there is technical or technological uncertainty and that the company can demonstrate the work it has done to try to resolve it. In other words, the incentive is for innovative efforts that can be documented, not just the commercial outcome.

Documentation is essential; it is not enough simply to claim that a new solution has been developed. It is necessary to explain what the starting point was, what limitations existed, what technical objective was pursued, what activities were carried out, what novelty was achieved, and what uncertainty was overcome. The certification criteria specifically emphasize demonstrating novelty, technical advancement, the causal relationship between activities and results, and the distinction from routine or non-qualifying tasks.

What expenses can be included in the deduction?

The basis for the deduction may include costs directly related to the R&D&I project and actually incurred in its implementation.

These may include expenses for technical staff, external consultants, certain materials or supplies, depreciation, and services specifically contracted for the project's development.

Certification and Reasoned Report: Greater Security for the Company

To strengthen legal certainty, many companies choose to have their projects certified by an ENAC-accredited entity and then request a Binding Reasoned Report from the Ministry of Science, Innovation, and Universities.

This report is not always required, but it can be particularly useful because it involves the tax authorities in the scientific and technological assessment of the activities carried out.

An incentive compatible with other forms of aid

Tax deductions for R&D&I may be compatible with other forms of public support and business financing. This allows the deduction to be integrated into a broader financial strategy. For an audiovisual company, this can mean having more leeway to reinvest in talent, technology, and new projects, and to support its own technological developments with less reliance on external financing.

Incorporating tax strategy into project design can make a difference in terms of feasibility and innovation capacity, especially as international competition intensifies and production costs become more challenging.

Why Audiovisual Companies Should Review Their Technology Projects

The transformation of the audiovisual industry is moving quickly. Artificial intelligence, virtual production, automation, immersive experiences, new interactive formats, and increasingly sophisticated post-production tools are changing the way content is created and distributed.

In this context, many companies may be generating innovation without recognizing it as such. And if it is not properly documented from the outset, a significant portion of the tax incentive may be lost.

Reviewing technology projects, organizing documentation, and analyzing which developments can be classified as R&D or technological innovation makes it possible to turn innovation into a real funding tool.

For production companies, studios, and technology firms in the audiovisual sector, R&D&I tax credits are not just a tax benefit. They are a way to recognize and support the technical efforts that make many of the solutions we see on screen today possible.

At ELZABURU, we work with innovative companies to identify, document, and advocate for their R&D&I projects, helping them integrate these incentives into a solid strategy for financing innovation.

Ignacio Alonso, Head of Innovation Financing at ELZABURU

Frequently Asked Questions About R&D&I Tax Deductions in the Audiovisual Industry

Can an audiovisual production qualify for R&D&I tax credits?

Yes, but not simply because it is an audiovisual work. The deduction is linked to the technological development associated with the project, such as new technical processes or substantial improvements in tools.

What is the difference between R&D and technological innovation?

R&D typically involves a completely new scientific or technological development. Technological innovation, on the other hand, can refer to substantial advances or improvements in existing technologies or processes. The classification depends on the technical content of the project.

Is it necessary for technological development to succeed?

Not necessarily. What matters is that there is a genuine technological uncertainty, that efforts have been made to resolve it, and that the entire process is properly documented.

Which companies in the audiovisual sector can benefit?

Production companies, animation studios, post-production companies, video game developers, virtual production companies, or companies that create their own technological tools for video, audio, or interactive content may explore the application of these tax deductions.

Why is it a good idea to plan for the deduction from the start?

Because technical and financial documentation is key. If the project is structured correctly from the start, it will be easier to justify the deduction, distinguish routine tasks from innovative activities, and reduce tax risks.

Tax deductions for R&D&I are one of the main incentives for research and development (R&D) and technological innovation (TI) in Spain. However, many companies find it difficult to determine whether their projects should be classified as R&D or as technological innovation.

Classification as R&D or IT is not merely a technical distinction; rather, it has a direct impact on the applicable corporate income tax deduction rate. Therefore, correctly classifying a project is essential for maximizing the available tax incentives.

In this article, we explain the difference between research and development and technological innovation, the role that the state of the art plays in this assessment, and how this classification affects R&D&I tax deductions.

What is considered research and development (R&D)?

Research and development projects aim to generate new knowledge or technological advancements that represent a breakthrough or significant advance over the current state of the art worldwide.

This type of project is characterized by two key features:

• High degree of technical uncertainty
• Significant technical risk

In other words, these are initiatives for which there is no known or obvious solution at the time the project begins, so the company must develop new technical solutions not available on the market, representing an objective innovation.

This disruptive nature is what justifies tax regulations establishing higher deduction rates for R&D projects as part of tax incentives for innovation.

What is technological innovation (TI)?

Technological innovation (TI), for its part, does not necessarily involve the creation of entirely new technology.

In these cases, the projects aim to introduce substantial improvements to the company’s existing products or processes, resulting in significant technical progress for the company, even though the technologies used may already exist on the market or within the industry; hence, they represent a subjective innovation.

Therefore, technological innovation is characterized by:

• Apply existing technologies in innovative ways within the company
• Implement significant improvements to processes or products
• To drive technical advancements for the organization, even if they are not entirely new to the industry

From a tax perspective, these projects may also qualify for R&D&I tax credits, although the credit rates differ from those for research and development.

The Role of the State of the Art in Project Evaluation

One of the key factors in determining whether a project falls under R&D or IT is a review of the state of the art.

A state-of-the-art analysis involves studying the existing technical knowledge in a given field before beginning a project. Its purpose is to identify:

• What technological solutions are already available?
• What level of development has the sector reached?
• If the project proposes a truly innovative breakthrough

Based on this analysis, it is possible to determine whether the project:

• Introduces a completely new development (R&D)
• Or it represents a significant improvement over existing technologies (IT)

Consequently, the state of the art becomes a key tool for technically justifying the nature of the project and its eligibility for R&D&I tax credits.

What happens if the project doesn't produce the expected results?

A common question among companies is whether the failure of a project prevents them from claiming tax deductions for R&D&I.

The answer is clear: not necessarily.

What matters in determining whether a project qualifies as research and development or technological innovation is not the final result, but the process of seeking real technical progress.

To this end, in order to defend the project's rating regardless of the final outcome, it is imperative that the company be able to demonstrate:

• Activities Carried Out During the Project
• The methodology used
• The technical documentation generated
• The rationale behind the technological challenge addressed

Therefore, even when a project does not achieve the expected results, it may still be considered R&D or technological innovation if the development effort undertaken is adequately demonstrated.

Why It Is Essential to Distinguish Between R&D and Technological Innovation

Correctly determining whether a project is R&D or technological innovation (TI) is key because this classification directly affects the applicable tax deduction percentage.

Under the R&D&I tax deduction framework, Spanish regulations establish different incentives depending on the nature of the project.

Percentage of the tax deduction for technological innovation (TI)

Technological innovation projects are eligible for a tax deduction of: 12% on expenses incurred during the tax year in mainland Spain, 15% in provincial tax zones, and 45% in the Canary Islands.

Percentage of the Research and Development (R&D) Tax Credit

Research and development projects are eligible for higher tax incentives:

In common territory:

• 25% deduction from expenses for the fiscal year
• A 42% deduction on the excess of expenses over the average of the previous two years

In the case of autonomous regions, the deduction rates range from 30 to 50 percent of eligible expenses, and in the Canary Islands , from 45 to 75.6 percent.

This spread reflects the higher technological risk and greater degree of uncertainty associated with research and development.

Key Tips for Properly Claiming R&D&I Tax Deductions

To correctly claim tax deductions for R&D&I, companies must pay special attention to several aspects:

• Properly analyze the state of the art before starting the project
• Determine whether the development falls under R&D or technological innovation
• Properly document all technical activities performed
• Justify the technical progress made during the project

Proper classification and documentation help reduce tax risks and optimize the use of innovation incentives available under the Spanish tax system.

Frequently Asked Questions About R&D&I Tax Deductions

What is the difference between research and development and technological innovation?

Research and development aims to generate entirely new technologies or knowledge, while technological innovation (TI) introduces substantial improvements to existing technologies or processes.

Can a tax deduction be claimed if the project is unsuccessful?

Yes. The success of the project does not determine whether it qualifies as R&D or technological innovation. What matters is demonstrating the actual technical development effort and the existence of a technological challenge.

What deduction percentage applies in each case?

• Technological Innovation (TI): 12% deduction on project expenses.
• Research and Development (R&D): A general deduction of 25% and up to 42% on expenses exceeding the average of the previous two years.

Promoting Innovation with Legal Certainty

Tax deductions for R&D&I represent a significant opportunity for companies to finance their research, development, and technological innovation activities. However, to take full advantage of these incentives, it is essential to correctly classify projects and adequately document their technical content.

At ELZABURU, we assist companies and organizations in identifying, structuring, and justifying R&D&I projects, helping them maximize available tax incentives and integrate innovation into their growth strategy.

José Miguel Sanabria, Consultant in the Legal and Innovation Financing Department at ELZABURU

The General Treasury of Social Security recently published the RED Newsletter 07/2026, which includes important clarifications regarding the application of Social Security contribution rebates for research personnel.

The specific rules governing these rebates are set forth in Royal Decree 475/2014, dated June 13, on rebates on Social Security contributions for research personnel. Subsequently, Royal Decree-Law 1/2023, dated January 10, introduced significant changes to that system and established a new framework applicable to employment incentives.

Key Changes in the Application of Social Security Tax Credits

The new bulletin maintains the general framework of the incentive and provides greater operational clarity on how these situations should be identified within the General Treasury of Social Security’s registration system. In practice, this clarification enhances certainty in the application of the rebate by specifying how certain data must be reported to avoid procedural issues.

1. How to Identify Eligible Research Staff: Value 9916 and Contract Codes

The General Treasury of Social Security reminds users that registration situations to which the tax credit applies must be identified using the code 9916 in the “Special Employment Relationship” field. Furthermore, this code must be linked to certain types of contracts in the General Treasury of Social Security, even when the code does not exactly match the contract formalized and reported to the State Public Employment Service. This clarification is particularly important, as the bulletin establishes a correspondence between the contract codes reported to the State Public Employment Service and the codes that must be entered in the General Treasury of Social Security in order to correctly apply the measure. In this way, the General Treasury of Social Security specifies which code must be used for the purposes of the tax credit when the code reported to the State Public Employment Service is different.

2. Application of the tax credit to workers who are already registered

Another key issue addressed in the bulletin is the possibility of applying the tax credit retroactively to employees who are already registered with the company, even if the tax credits were not yet applicable during the initial registration period. In these cases, the employee must initially be registered without a “Special Employment Relationship.” When the tax credit becomes applicable, the employee’s registration from the previous period must be canceled, and a new registration must be processed with the code 9916.

Therefore, the bulletin confirms an important operational guideline: there may be an initial registration period without a subsidy and without a Special Employment Relationship, and subsequently, once the requirements for applying the incentive are met, the subsidized status may begin through a new registration under Special Employment Relationship 9916.

This clarification is particularly useful in cases where, following the amendment introduced by Royal Decree-Law 1/2023, the tax credit for certain workers has not yet been initiated because it was not applied at the time of their initial registration. To the extent that these workers currently meet the required criteria, the form allows the situation to be rectified by deregistering them from the “Special Employment Relationship” period and re-registering them under Special Employment Relationship code 9916.

3. Periods of research staff not eligible for bonuses: use of value 9938

The bulletin also regulates the use of code 9938, identified as “Research, Development, and Innovation Personnel—Non-Incentivized.” This code must be used when, during a period of employment in which the incentivized status had already been initiated using code 9916, there is a period during which the incentive does not apply. Consequently, code 9938 allows for the identification of non-subsidized periods once the employee has already been correctly enrolled in the subsidized research staff program.

Why This Update Is Relevant to Businesses

In summary, this update provides greater certainty in the administrative management of these tax credits, particularly in five areas:

• correct identification of research personnel eligible for the bonus using the code 9916;
• equivalence between contract codes of the State Public Employment Service and contract codes of the General Treasury of Social Security;
• the possibility of initiating the tax credit for employees who are already enrolled, even if it is not yet applicable during the initial period;
• Operating procedure for initiating this tax credit by terminating the period under a Special Employment Relationship and re-registering under a Special Employment Relationship 9916;
• Treatment of periods during which the employee is a research staff member but the tax credit does not apply, using code 9938.

For companies carrying out R&D&I projects, these clarifications represent an opportunity to review both the situations currently eligible for the tax credit and those research employees who, although already on the payroll, may now meet the requirements to qualify for the incentive. It is also advisable to verify whether there are employees who meet the required conditions but are not yet included in the tax credit program.

This update enhances the reliability of the incentive program and allows for a more precise review to ensure that registrations, changes, and eligible periods are correctly reported to the General Treasury of the Social Security System. Conducting a preliminary review of the employment, technical, and documentation status streamlines this process, reduces risks in reporting, and helps ensure the incentive is utilized with greater certainty. In a context where investment in innovation requires planning and oversight, proper management of these rebates can help optimize costs and strengthen the company’s strategy for funding its research activities.

José Miguel Sanabria, Consultant in the Legal andInnovation Financing Department at Elzaburu

CONTEXT

A technology company engaged in constant, highly specialized innovation

Virtual Cable is a Spanish technology company specializing in the development of secure solutions for the digital transformation of the workplace. Through its proprietary platform, UDS Enterprise, the company develops virtual desktop infrastructure (VDI) solutions that are fully tailored to the needs of each user.

Its commitment to customization, flexibility, and constant adaptation to new technological environments has led the company to maintain a strong focus on innovation. Through the evolution of UDS Enterprise, Virtual Cable has incorporated developments related to desktop virtualization, integration with cloud, hybrid, and multicloud environments, compatibility with new service providers, improved connectivity protocols, multi-factor authentication, advanced security mechanisms, and optimizations in performance, scalability, and user experience. All of this has enabled the platform to continue adapting to increasingly complex infrastructures and the specific needs of different user profiles.

It was precisely this recurring pattern of technological evolution in its platform—supported by functional, architectural, and security developments that went beyond routine software maintenance—that made it necessary to analyze which part of that activity could qualify for tax incentives linked to technological innovation.

TECHNICAL APPROACH

Identify and properly structure the innovative activity

The project began with several sessions with Virtual Cable's technical and management teams to understand the technological developments that were taking place internally.

From there, a comprehensive technical and tax analysis was conducted of the various projects and updates developed by the company, with the aim of identifying which developments were eligible for the tax incentives provided for R&D&I projects, distinguishing them from routine tasks such as maintenance, support, correction, or minor software modifications.

One of the key issues was determining whether these developments should be approached as R&D projects or as technological innovation. After reviewing the scope of the work and the degree of improvement incorporated, it was determined that the most appropriate approach was to structure them as technological innovation projects.

Based on that assessment, the economic analysis began: identifying which costs were associated with the projects and could form part of the basis for the deduction. To do so, it was necessary to work in coordination with the company’s technical and financial teams, reviewing the personnel involved, their time commitments, external collaborations, and other expenses necessary for the execution of the projects.

Based on all this information, the technical and economic framework necessary for Virtual Cable to claim, for its corporate income tax, the tax deductions corresponding to its technological innovation activities was established; the regulations and application of these deductions are set forth in Article 35.2 of the Corporate Income Tax Law.

At the same time, work was also carried out to certify Virtual Cable as an innovative company based on the AENOR EA0047 specification, which stipulates that certain indicators must be met across the areas of human resources, economic and financial resources, innovation methods, organization of process results, and job creation in R&D&I. In Virtual Cable’s case, this recognition allows the company to institutionally reinforce its innovative nature and ensure consistency in the incentive strategy linked to its ongoing technological activities.

RESULT

An incentive structure aligned with the company's capacity for innovation

As a result of the project, Virtual Cable was able to claim tax deductions equal to 12% of the expenses classified as technological innovation, in accordance with the provisions for this type of activity set forth in the Corporate Income Tax Law, thereby optimizing the resources invested in the development and ongoing improvement of its platform.

Obtaining this certification also served as official recognition of Virtual Cable’s capacity for innovation and the technological work the company has been carrying out continuously for years, strengthening its position within the national innovation ecosystem and facilitating better coordination of the various public instruments that support R&D&I.

In addition, the project enabled the company to establish an internal methodology for identifying, documenting, and structuring future technological developments from both a technical and economic perspective. As a result, the company was able not only to optimize the tax treatment of the investment already made but also to lay the groundwork for managing its future innovation initiatives in a more systematic manner.

José Miguel Sanabria, R&D&I Consultant

José Miguel Sanabria, a consultant in ELZABURU's Innovation Financing division, has led the project to analyze and structure the tax incentives implemented by Virtual Cable.

Specializing in innovation financing, José Miguel regularly participates in projects related to the identification, analysis, and technical defense of innovative developments, assisting companies both in applying for tax deductions and in obtaining certifications and accreditations related to innovation.

R&D has established itself as one of the main drivers of business competitiveness, sustainable growth, and technological leadership. In an increasingly demanding European context, investment in research and development not only drives innovation but also strengthens companies’ visibility and relative standing in international rankings.

In this context, theSpain R&D Ranking 2025, compiled by the European Commission’s Joint Research Center (JRC), provides a clear overview of the role played by Spain’s most R&D-intensive companies.

The Standing of Spanish R&D in the European Rankings

Spain has managed to place 26 companies in the ranking of the 800 European companies that invest the most in R&D, representing 3.3% of the total. This presence reflects the strength of the Spanish business sector in terms of innovation, with a particularly significant presence in strategic sectors such as banking, energy, technology, healthcare, and manufacturing.

Spanish Companies in the European Top 100

In this context, six Spanish companies stand out for their ranking among the top 100 European companies in terms of R&D investment:

1. Santander (29th place)
2. Amadeus (41)
3. Telefónica (60)
4. Grifols (89)
5. Iberdrola (91)
6. Indra (93)

These companies not only lead the national scene but also strengthen the international standing of Spanish R&D. In particular, the top five are also among the 2,000 companies worldwide that invest the most in R&D, accounting for 0.25% of the global total.

Inditex's Entry and the Positive Trend in the Rankings

A notable milestone in the most recent edition of the ranking is the entry of Inditex, which joins the list as the seventh-highest-ranked Spanish company, reaching 103rd place. This entry is particularly significant, as the company has traditionally been associated with business models that emphasize design, logistics, and digitalization rather than R&D in the classical sense. Its inclusion demonstrates a broadening of the concept of corporate R&D, which is increasingly linked to technological processes, data analytics, and digital transformation.

Furthermore, of the 21 Spanish companies that have made the list again, 17 have improved their ranking compared to the previous year, which demonstrates a positive and sustained trend in investment in research and development by the Spanish business community.

Why don't many Spanish companies appear in the ranking?

There is a contrast between the number of companies that invest in R&D in Spain and those that ultimately appear in the ranking. According to data from the National Institute of Statistics (INE), more than 12,200 Spanish companies invested in research and development in 2024. However, only a very small fraction of them appear on the list compiled by the European Commission’s Joint Research Center.

As noted by the Cotec Foundation for Innovation, this gap is not due to a lack of innovation, but rather primarily to methodological and reporting issues. Many organizations do not report their R&D investments in accordance with the methodological criteria required by the JRC, which means that a significant portion of the innovation efforts carried out in Spain is not captured by the indicators used in the ranking, even though these are real and, in many cases, substantial investments.

Added to this circumstance is the structural issue related to the very definition of innovative activities. R&D&I encompasses not only Research and Development (R&D) but also Technological Innovation (TI), whose importance in the Spanish context has increased significantly in recent years. The 2023 IMV Application Report, prepared by the Ministry of Science, Innovation, and Universities, details the evolution of both concepts.

In 2011, a total of 2 , 702 Binding Reasoned Reports were issued, of which 57.8% corresponded to projects classified as Research and Development, while 37.4% were associated with projects classified as Technological Innovation. In 2023, this distribution was reversed, with R&D reports accounting for 37.5% of the total, compared to 62.1% for TI projects.

This trend is not due to a relative decline in research and development projects in favor of technological innovation, but rather to the rapid and uninterrupted growth of technological innovation in Spain over more than a decade, compared with R&D advancing at a more moderate pace. In practice, many companies are focusing a growing portion of their innovation efforts on technological improvement, digitization, process optimization, and incremental development—activities that are not always adequately reflected in international R&D rankings.

However, it is worth noting that, compared to the number of Binding Reasoned Reports issued in 2011, 8,127 reports were issued in 2023 , which clearly reflects the growing commitment of Spanish companies to R&D&I in its various forms.

R&D Management as a Strategic Business Element

Investment in R&D requires more than just a one-time financial commitment. For companies engaged in ongoing innovation, the challenge lies in managing that investment consistently, ensuring that the resources allocated and the knowledge generated translate into tangible and measurable value for the business.

Effective management of research and development involves clearly identifying innovative activities, consistently monitoring projects, and having reliable financial information that allows for the evaluation of both the impact of the investment and its return. This approach not only facilitates decision-making and improves the efficiency of resources allocated to R&D, but also strengthens the company’s competitive position in increasingly demanding and globalized markets.

From this perspective, R&D becomes a strategic asset that requires a comprehensive vision and specialized management, aimed at maximizing the return on investment and providing continuity and stability to the company’s commitment to innovation, regardless of its size or industry. The systematization of processes, rigorous documentation, and alignment with corporate objectives are key elements in ensuring that innovation ceases to be an isolated effort and becomes a driver of sustainable growth.

Data from the European ranking confirm that Spain is home to leading R&D companies and a business community that is deeply committed to research and development. However, significant challenges remain in terms of visibility, reporting, and international recognition. Beyond any ranking, the true competitive advantage lies in managing R&D in a strategic and coherent manner, aligned with business objectives, thereby making innovation a structural pillar of the company

At Elzaburu, we support and advise companies on how to maximize the benefits associated with their R&D&I projects, helping them extract the full value from their innovative activities and strengthen their long-term commitment to research and development. If you would like to explore how to optimize the return on your R&D investment through a specialized and rigorous approach, our team is here to advise you.

José Miguel Sanabria, Consultant in the Legal and Innovation Financing Division at Elzaburu

On July 17, 2025, the Central Economic-Administrative Court (TEAC) issued two key rulings (RG 5685/2024 and RG 1267/2025) that standardize the criteria applicable to tax deductions for Research, Development, and Technological Innovation (R&D&I) activities under the Corporate Income Tax. This decision marks a milestone for innovative companies, as it provides greater regulatory clarity and strengthens legal certainty in an area that, until now, had been fraught with significant uncertainties.

A New Framework for R&D&I Deductions

Until recently, many companies followed the guidelines established by the General Directorate of Taxes (DGT), which allowed them to claim R&D&I deductions generated in prior fiscal years, even if they had not been included in the initial self-assessment. Binding rulings such as V-802-2011, V-0297-2012, and V-2400-2014 supported this approach, giving companies some flexibility to plan the use of their tax incentives.

The situation changed in June 2022, when Binding Ruling V-1511-2022 introduced a much more restrictive approach. From that point on, deductions could only be claimed if they were included in the tax return for the corresponding fiscal year or if an amendment was requested within the statutory deadlines. This change caused uncertainty and created risks for companies with R&D&I projects, which could lose significant tax benefits.

TEAC Rulings: Two Distinct Systems

In its July 2025 rulings, the TEAC definitively clarifies the situation and identifies two distinct scenarios:

1. Self-assessments prior to June 24, 2022

The TEAC adheres to the interpretation in effect prior to Advisory Opinion V-1511-2022. Therefore, R&D&I deductions generated before that date may be claimed in subsequent tax years without the need to amend the initial self-assessment, provided that the right to claim them has not expired.

This represents a significant opportunity for companies that, for strategic or planning reasons, did not take full advantage of their deductions at the time. They will now be able to claim them and optimize their tax burden.

2. Self-assessments effective June 24, 2022

In subsequent rulings, the TEAC reaffirms the mandatory nature of the new criterion. That is to say:

• Deductions must be included on the original tax return.
• If they are not reflected, you will need to request a correction within the established time frame.

For businesses, this means strengthening internal controls and tax management processes to ensure that an administrative oversight does not result in the loss of significant tax benefits.

Strategic Implications for Innovative Companies

The new framework provides legal certainty in an area that is particularly sensitive for companies with investments in R&D&I.

Among the main impacts are:

• Reclaiming Unused Tax Deductions: Organizations with projects dating back to before 2022 have the option to review closed fiscal years and apply tax deductions that have not yet been used (provided they are within the statute of limitations).
• Freeing up resources for innovation: Optimizing the tax burden allows capital to be redirected toward new technological developments.
• Call for greater oversight and planning: In fiscal years after 2022, deductions will require more rigorous management and comprehensive documentation from the start of each project.

An Opportunity to Review the R&D&I Tax Strategy

The current regulatory framework, combined with recent rulings by the TEAC, provides an ideal context for analyzing and redesigning the management of tax deductions.

Companies have up to 18 years to utilize the profits generated, which expands their strategic options. This makes this moment a key opportunity to:

• Comprehensive review of tax balances: identify deductions that have been generated but not claimed.
• Update to internal policies: Ensure that all R&D&I projects are properly documented from the outset.
• Designing Long-Term Tax Strategies: Integrating Innovation as a Central Element in Optimizing Resources and Tax Benefits.

A more predictable fiscal framework that fosters innovation

With these rulings, the TEAC establishes a more stable and predictable environment for companies that invest in R&D&I. Legal certainty and regulatory clarity make it possible to plan projects with a broader scope, without fear of changes in interpretation that could jeopardize the associated tax benefits.

At Elzaburu, we closely monitor regulatory developments regarding tax incentives for R&D&I in order to provide our clients with up-to-date, thorough advice tailored to their needs, helping them make the most of the opportunities offered by the current tax framework.

David Puentes, Head of Innovation Financing at Elzaburu.

We have recently learned of the Supreme Court’s (SC) decision, which represents a very significant update regarding tax deductions for technological innovation and sets an important precedent.

The Supreme Court has ruled that the Ministry of Science’s report on the tax deduction for technological innovation is binding on the Tax Administration. Consequently, all of us who work to study and advise on the best financing options for innovation have reason to celebrate following the three rulings handed down in appeals Nos. 948, 1633, and 1635/2023.

Supreme Court Ruling Strengthens the Application of Tax Deductions for R&D&I

In summary, the Supreme Court has ruled that the Ministry of Science’s report on the tax deduction for technological innovation is binding on the Tax Administration. The Administrative Appeals Chamber has recognized the appellants’ right to the tax deduction for technological innovation that they had claimed in their self-assessments.

Some key points to put this Supreme Court decision—which all stakeholders involved in R&D&I in Spain had been awaiting—into context are as follows:

2. The Administrative Court has overturned the rulings of the National Court that upheld the reports of the IT Support Team (EAI), an internal unit of the State Tax Administration Agency (AEAT), on the grounds that they contradicted the binding opinion on technological innovation issued by the Ministry of Science and Innovation.
3. Article 35.4 of the Consolidated Text of the Corporate Income Tax Law (TRLIS) of 2004 provides that companies may request a report from the Ministry of Science and Innovation (MCIN) for the tax deduction for technological innovation. According to the law, that report is binding on the AEAT.

Given its terms, the report holds the AEAT accountable in all respects—that is, not only with regard to the classification of the project as part of such a technological innovation, but also with regard to the investments and expenses submitted by the companies that have been evaluated positively.

3. In particular, such binding reports cannot be challenged or disregarded by the AEAT’s bodies, either in determining whether projects qualify for the tax deduction or with regard to the expenses included in the project. 

The Ministry of Science’s Reasoned Report: Binding and Decisive for the Treasury

In short, at ELZABURU, we believe that this decision by the Supreme Court should provide legal certainty to companies regarding the application of R&D&I tax deductions, ensuring that the Spanish Tax Agency (AEAT) fully respects the Binding Reasoned Reports.  In fact, we have already received a favorable ruling on an appeal for reconsideration on behalf of a client for whom we argued in favor of applying these deductions, and the Spanish Tax Agency has decided to fully grant the appeals filed.

However, given that the Supreme Court has ruled on deductions for tax years subject to the TRLIS regulations—which, with regard to the rules on reasoned reports, differ in certain respects from the current Corporate Income Tax Law (LIS)—we will have to wait until the rulings are published and analyzed in depth before we can determine their implications under current legislation. We therefore recommend caution pending a more thorough and in-depth analysis of the rulings.

In conclusion, the good news is that, based on this significant decision by the Supreme Court, there are arguments and considerations that suggest legal uncertainty regarding the application of R&D&I tax deductions has been considerably reduced.

New Challenges and Opportunities in Legislation on Tax Deductions for Technological Innovation

However, it would be both desirable and necessary to reform the current law so that it is better suited to the new technologies and ICT (Information and Communications Technologies) sector—an industry that accounts for an increasingly significant and growing share of our GDP—in order to better align the tax incentive system with R&D&I projects in Spain.

One suggestion for improvement that we believe is worth considering, for example, could be to conduct a comparative analysis with neighboring countries (Portugal, France, and Belgium, among other European Union countries) in an effort to emulate those legal frameworks that provide greater legal certainty for R&D&I-intensive companies in Spain.

In any case, we would like to commend the Supreme Court for this decision, as it provides the legal certainty that all of us in the R&D&I sector have been hoping for for many years.

We therefore welcome this ruling, which supports the legislature’s ultimate goals: to promote and encourage competitiveness and innovation among Spanish companies.

David Puentes, Head of Innovation Funding at ELZABURU 

On November 3, the Congress of Deputies approved the Draft Law on the Promotion of the Startup Ecosystem, better known as the Startup Law. It was finally enacted on December 21 and took effect upon its publication in the Official State Gazette (BOE) the following day. This law has the following main objectives:

– Creation and growth of innovative, knowledge-based, digitally driven, and fast-growing companies (hereinafter referred to as “startups”).
– Attracting talent and investment by creating favorable ecosystems.
– Attracting specialized investors or “business angels.”
– Fostering the development of hubs in outlying cities as well as in rural areas.
– Promoting investment in innovation, leveraging available public support instruments, and strengthening public-private partnerships

It is important to note that in order to benefit from the provisions of this law, it will be mandatory—as an essential requirement—to obtain the “startup” designation issued by the National Innovation Agency SME S.A. (ENISA).

This agency will assess whether the company meets all the requirements: being newly or recently established, being independent, having its registered office or permanent establishment in Spain, having at least 60% of its workforce in Spain, being innovative, not being publicly traded or having distributed dividends, and having annual revenue of no more than ten million euros.

Given the need for legal provisions that adapt the current reality to the intrinsic characteristics of these companies, the bill introduces a series of new provisions in the areas of tax, commercial, civil, and labor law, which will be analyzed from three perspectives: that of the startup itself, that of the employee, and that of the investor.

Startups will enjoy significant tax and legal benefits

As we noted in the introduction, the company must apply for startup status. Once the application is submitted, ENISA will have a maximum of three months to grant the corresponding certification; if it does not issue a decision within that period, the administrative silence will be deemed a positive decision.

Once ENISA issues the authorization, the startup will be entitled to the following incentives:

First, a reduction in the corporate income tax rate from the current 25% to 15%, for a maximum of four years starting from the first fiscal year in which the taxable income is positive, provided that the company maintains its status as a startup, bearing in mind that after five (or seven) years, the startup will no longer be eligible for the benefits of the law. Second, the startup’s general meeting may authorize the acquisition of treasury stock up to a maximum of 20% of the capital, for the sole purpose of implementing a compensation plan.

Third, all corporations are subject to dissolution due to losses when such losses reduce their net worth to an amount less than half of their share capital. The bill introduces a new provision stating that startups will not be subject to such dissolution until three years have elapsed since their incorporation.

Attractive incentives for employees to attract talent

With the aim of attracting talent and providing an attractive and appropriate compensation policy, the tax treatment of the regime known as stock options has been improved. The tax exemption limit, which was 12,000 euros, has been raised to 50,000 euros per year. In fact, and as a significant new development, under the new regulations, taxation will be deferred until the gain from the stock options is realized and liquidated or, if that is not possible, ten years after the shares or equity interests are granted.

Furthermore, with the aim of attracting foreign talent, this bill improves access to the special personal income tax regime for workers posted to Spain: it reduces the number of tax years prior to the posting to Spain during which the taxpayer cannot have been a tax resident in Spain, from ten to five years.

In addition, workers covered by the Special Social Security Regime for Self-Employed Workers (RETA) who exercise effective control over a startup and who are also employed by another employer will receive a 100 percent reduction in their RETA contributions for three years.

Improvements to Tax Deductions for Domestic and Foreign Investors

The tax deduction for investments in new or recently established companies is being increased, raising the deduction rate from 30 to 50 percent of the amounts paid for the subscription of shares or equity interests and raising the maximum base from 60,000 to 100,000 euros per year.

In addition, the time limit for claiming this deduction on the purchase of shares or equity interests is generally extended from three to five years, counting from the entity’s incorporation, and up to seven years for certain categories of startups, such as those in the biotechnology, energy, or industrial sectors.

Tax incentives are provided for the performance-based management of venture capital firms

On the other hand, if the investment in startups is made through an investment fund, there will be a team of people responsible for managing that fund. It is very common for them to be compensated with a performance fee (carried interest), in addition to other types of fees.

In line with regulations in neighboring European countries, the tax treatment of compensation earned for successful management is regulated. In this regard, carried interest will be considered income from employment. However, a 50% tax credit will apply, with the aim of aligning the tax treatment with that of neighboring countries.

In conclusion, the passage of this law marks a decisive step forward in a sector that has been calling for specific regulation for years, especially considering that Spain ranks fourth in Europe in terms of the number of startups, with 11,100 companies employing 140,000 people, according to the PwC report “The Socioeconomic Contribution of South Summit in Spain.”

Alberto López Cazalilla, Attorney at ELZABURU