Industrial tax adviser: optimise the tax burden of your manufacturing business

Industrial taxation: the incentives that few companies fully exploit

Manufacturing companies are among the greatest beneficiaries of Spain’s Corporate Income Tax incentive system. R&D&I deductions, free depreciation, the capitalisation reserve, SME regimes, and internationalisation incentives form a toolkit that can significantly reduce the effective tax rate. The problem is that these tools require specific technical knowledge and rigorous documentation that a generalist adviser can rarely provide.

At BMC we have direct experience advising manufacturing and industrial companies: component manufacturers, engineering businesses, agri-food industry, metallurgy, plastics, and automotive supply chain businesses. We know the AEAT’s approach to R&D&I audits and transfer pricing reviews, and how to document and defend the tax positions taken.

R&D&I in industry: from deduction to monetisation

R&D activities in manufacturing are common although not always correctly identified as such: the development of new materials, improvements to production processes, the design of new tools or moulds with novel technical characteristics, and the adaptation of existing products for new applications may all qualify as R&D or technological innovation for tax deduction purposes.

We analyse the company’s technology roadmap, identify qualifying projects, document eligible expenditure, and apply the deductions. For companies with insufficient Corporate Income Tax liability, we explore early monetisation of the deductions.

Depreciation and investment planning

Capital investments in machinery, plant, and production technology are the principal assets of a manufacturing company. The tax depreciation regime — standard tables, accelerated depreciation for SMEs, free depreciation linked to workforce maintenance — determines when and to what extent those investments may be deducted.

We plan capital investments to maximise tax benefit: timing of purchases, selection of depreciation regime, financing structure (outright purchase, finance lease, operating lease), and coordination with Corporate Income Tax planning.

International transactions: VAT and transfer pricing

Exporting manufacturing companies face complex VAT obligations: managing zero-rating on exports, VAT refunds, customs warehousing regimes, and the treatment of triangular transactions. For groups with overseas production or distribution subsidiaries, the transfer pricing policy determines how group profits are distributed between countries and, therefore, the overall tax burden.

We advise on both dimensions with an integrated approach: transfer pricing policy and group tax planning must be designed coherently.

Energy transition incentives for manufacturers

Spain’s industrial decarbonisation agenda has introduced a series of tax and financial incentives that manufacturing companies should actively track. The most material for tax planning purposes:

Green investment deductions (Ley 13/2023). From 2024, investments in energy efficiency assets (heat pumps, on-site solar generation, industrial electrification equipment) qualify for a Corporate Income Tax deduction of 30-40% of the investment amount. This is in addition to standard depreciation, creating a double benefit: the deduction reduces the current year’s tax liability while the asset continues to be depreciated in future years.

Hydrogen economy deductions. Companies investing in green hydrogen production, storage, or integration qualify for an enhanced deduction of 45% of the qualifying investment. This deduction is intended to accelerate Spain’s National Hydrogen Roadmap and represents a significant incentive for manufacturers in energy-intensive sectors.

Ley Crea y Crece (Law 18/2022) digitisation requirements. Manufacturing companies subject to the electronic invoicing mandate — phased in from 2024 for companies above €8 million in turnover, extended to all companies from 2025 — face IT investment to implement compliant e-invoicing systems. These implementation costs are deductible in the year of investment and may qualify for the R&D deduction if the implementation involves technical innovation in the company’s production information systems.

AEAT inspections in manufacturing: the current focus areas

AEAT’s manufacturing sector inspection units concentrate on three areas in 2024-2026 campaign plans:

R&D deduction qualification. Manufacturing companies claiming R&D deductions without binding technical qualification reports (informes motivados vinculantes) from the Ministry of Science are the primary inspection target. AEAT has developed sector-specific benchmarks for automotive, aerospace, and pharma R&D expenditure ratios; companies with ratios outside the benchmark range are flagged for closer review.

Customs and import VAT. The post-Brexit restructuring of supply chains and the increase in direct imports from Asia have created compliance gaps in customs classification and import VAT treatment for many manufacturers. AEAT coordinates with customs authorities to identify discrepancies between declared customs values and declared input VAT bases.

Subcontracting and outsourced manufacturing. Manufacturers that outsource production to Spanish subcontractors must manage the VAT treatment of the outsourced work, the transfer pricing implications of intercompany manufacturing arrangements, and the Social Security joint liability risk for subcontractors’ workers employed on the manufacturer’s premises. BMC provides a comprehensive compliance programme for manufacturers with significant subcontracting operations.

Industrial energy costs and tax deductibility

Energy costs represent a significant operating expense for manufacturing companies, and their deductibility is subject to specific rules that require proactive management.

Electricity and gas tariffs. Energy consumed in manufacturing processes is fully deductible as a production cost. However, energy consumed in company vehicles, management facilities, or non-production uses must be apportioned and may be subject to limited deductibility (vehicles) or benefit-in-kind taxation (management use). Maintaining sub-metering for production versus non-production energy consumption provides the documentation needed to support full deductibility of production energy costs.

Special energy taxes. Manufacturers subject to the Hydrocarbon Tax (Impuesto de Hidrocarburos) on fuel and the Electricity Tax (Impuesto Especial sobre la Electricidad) are entitled to partial rebates (devoluciones del impuesto) on energy used in certain industrial processes. The rebate rate depends on the energy intensity of the process and the sector’s classification. Many manufacturers do not claim available energy tax rebates because the claim process requires specific documentation from the energy supplier and coordination with the AEAT energy tax unit.

Corporate restructuring for manufacturing groups

Manufacturing groups with multiple production entities — facilities in different regions or countries, separation between production, distribution, and R&D entities — benefit from corporate reorganisation planning that optimises the group tax position without triggering immediate tax charges.

Tax-neutral reorganisation regimes (Art. 76-89 LIS). Mergers, partial split-offs, and asset contributions to holding companies can be structured as tax-neutral under the Special Mergers Regime, provided they have a genuine business purpose beyond tax avoidance. This regime defers the tax charge on unrealised gains until the assets are ultimately disposed of by the acquiring entity, allowing manufacturing groups to restructure around operational logic without a prohibitive upfront tax cost.

Patent box regime (Art. 23 LIS). Manufacturing companies that have developed patented products or processes qualify for a 60% exemption on royalties derived from the qualified intellectual property. Combined with the R&D deduction on the development expenditure, the patent box creates a highly tax-efficient model for IP-intensive manufacturers — the same expenditure that was deducted at 25-42% during development becomes income that is 60% exempt on exploitation.

Capital allowances and the transition to sustainable assets. Investment in sustainable manufacturing equipment — electric vehicle fleets, solar installations at production facilities, high-efficiency HVAC systems — qualifies for both accelerated depreciation under SME regimes and the new green investment deductions introduced by Ley 13/2023. BMC plans capital investment programmes to maximise the combined benefit of both regimes, ensuring that investment timing and asset categorisation optimises the annual corporate tax position.

Customs and import management for manufacturers

Manufacturers sourcing components, raw materials, or finished goods from outside the EU face specific customs and import tax obligations that intersect with the corporate tax and VAT compliance framework.

Customs classification and tariff rates. Each import line must be correctly classified under the Combined Nomenclature (CN), which determines the applicable customs duty rate and any preferential tariffs available under EU free trade agreements. Misclassification — whether through negligence or incorrect supplier-provided documentation — results in under-collection of customs duties that AEAT’s customs audit units actively pursue through post-clearance checks.

Anti-dumping and countervailing duties. Manufacturers importing steel, aluminium, ceramics, solar panels, and certain chemical products from China and other countries face anti-dumping duties on top of standard customs duties. These duties are product and origin-specific and change as the European Commission reviews dumping margins. Monitoring applicable anti-dumping orders and incorporating their cost into sourcing decisions is an ongoing compliance obligation.

Import VAT deferral (Art. 74 VAT Act). Importers meeting volume thresholds can apply to include import VAT in their standard quarterly or monthly VAT return (operadores de importación de IVA con diferimiento) rather than paying it at the border. This provides a cash flow benefit of 30-90 days on the import VAT — converting a cash payment at customs clearance into a balance sheet timing item matched against deductible input VAT in the same return period.

Transfer pricing for manufacturing groups: the toll manufacturing model

Manufacturing groups that operate with one entity as the IP owner and risk bearer, and another as a “contract manufacturer” or “toll manufacturer,” face specific transfer pricing challenges that AEAT has targeted in recent inspection campaigns.

In a toll manufacturing model, the contract manufacturer produces goods to the IP owner’s specification using the IP owner’s materials, bears no inventory risk, and is paid a routine return (typically a cost-plus margin). The IP owner retains all market risk, inventory risk, and product design authority.

AEAT’s challenge to these models focuses on substance: does the IP owner have the DEMPE functions necessary to justify its position as the economic owner of the manufacturing IP? Does the contract manufacturer have any unique functions or assets that are not compensated in the routine cost-plus margin? Are there economic risks at the contract manufacturer level (raw material price risk, tooling impairment) that should be compensated separately?

BMC defends toll manufacturing transfer pricing positions by documenting the complete functional analysis, applying the most appropriate transfer pricing method (TNMM on the contract manufacturer), and preparing an advance pricing agreement application for the highest-volume arrangements to eliminate prospective audit risk.