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V2822-20 17 September 2020 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · innovación tecnológica

Acquisition of machinery to improve production processes does not qualify for technological innovation tax relief

A company sought clarification on whether investing in an engineering project to improve its polyethylene manufacturing process qualified for the technological innovation tax deduction. The Directorate General for Taxes (DGT) ruled that purchasing machinery to enhance production does not constitute a technological innovation activity.

The question raised

Whether, for the purposes of applying the deduction under Article 35.2 of the LIS, the investment made is considered technological innovation and generates the right to the deduction.

The DGT's ruling

For technological innovation to exist, there must be a technological advancement in new products or processes, or substantial improvements to existing ones that involve an essential and not merely formal change. Routine quality improvement efforts or the incorporation of facilities and machinery for production are not considered innovation activities. Investment in tangible fixed assets that form part of the production process is not considered technological innovation, even if they represent an improvement to the process.

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