report

Catalonia: a win-win tax system for R&D

Catalonia as a hub for research and innovation. Economic and fiscal framework.

February 2013.- The Catalan economy, clearly European in its outlook, sustainable and competitive, is a real hub of innovation and research in southern Europe thanks to its quality and scientific excellence.

In Catalonia, industry accounts for almost 19% of the region's economy, higher than Spanish economy figures and above average within the European Union. Factors of technology and innovation, as measured by the high percentage of GDP spent on R&D&I, contributes to this situation. In this sense, approximately 1.7% of Catalan GDP (which as a whole represents 20% of Spain's GDP), close to the EU-27 2% (comparable to countries such as Ireland and Denmark), is spent on R&D; while on a Spanish state level figures are just over 1.3%.

With these figures, it is clear that Catalonia is a driver in southern Europe in terms of its R&D efforts, registering a steady growth since 2002, exceeding the percentage of GDP spent on R&D in leading economies normally understood to have favourable R&D fiscal frameworks, such as the Netherlands, Norway and Luxembourg, among others. This growth in recent decades is due in part to the region’s own creativity and entrepreneurship, but is clearly boosted by a supportive legal and fiscal framework.

R&D&I tax credits

Together with the benefits of not taxing 50% of revenue from the sale of the right of use or exploitation of certain intangible assets - Patent Box - (such as patents, designs, secret formulas or processes and know-how general), Catalonia, within the Spanish state framework, offers some of the most significant OECD tax incentives in R&D.

These incentives allow tax deductions on company tax of between 8% and 59% of the costs associated to innovation projects undertaken each year, and benefits as much businesses with profits as those showing losses, because if a company fails to make a profit, it has a period of up to 18 years in which to apply the credit. In other words, taxes payable may be reduced by a total of almost 60% of expenditure on R&D, that is, less direct cash out directly for the company who decided to invest in Catalonia.

Conditions for access to credit are diverse:

Research and Development

  • 8%: Investments in tangible and intangible assets (excluding land and buildings).
  • 25%: Expenses in R+D up to the previous two year average.
  • 42%: Expenses in R+D over the previous two year average.
  • 17% (additional): Expenses in investigators only working in R&D.

Technological Innovation

  • 8%: Industrial design and production processes engineering.
  • 8%: Purchasing of advanced technology (know-how, patents, designs&sciences) 1 MEURO limit.
  • 8%: Obtainment of ISO 9000, GMP or similar.

International comparisons

The beneficial R&D tax framework found in Catalonia is not go unmissed by the business world. Thus, in comparative terms, Belgium and Holland, regions famous for generous tax conditions, offer far less advantageous tax rebates than those found in Catalonia, either because the rebates themselves are lower or because they do not stimulate current expenditure.

Furthermore, industrial economies such as Germany and UK offer no tax deductions for R&D. You need to leave Europe and go to countries such as India, Morocco and China to find similar tax systems or ones with significant advantages, but these then have also far different financial climates and certain problematic issues for an investor.

In short, Catalonia is one of the most attractive investment locations in the world and offers research related tax rebates that are the perfect tool to stimulate the development of open and collaborative innovation.

Recent studies, taking the cost per researcher as a reference, show that Catalonia is far more competitive than countries like France, Italy, UK, Belgium and Germany among others.This is true not only in Europe, but also in comparison with Asian actors like Japan or Singapore.

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Catalonia, world leader in scientific excellence

Catalonia comes third in the ranking of scientific excellence in the EU - only behind the Netherlands and Sweden - according to the number of projects of excellence funded by the European Research Council and considering the number of inhabitants per country.

Today Catalonia is an international leader in biomedical research, not to mention its clear commitment to emerging technologies development such as photonics and nanotechnology, as well as strengthening core technologies like chemistry.

Barcelona, Catalonia’s capital, is the world’s second largest city in terms of production of scientific publications on nanobiomedicine after Boston (according to PubMed). In addition, via ACC1Ó, support is given to companies in the implementation of national and international R&D projects, on a transnational and collaborative basis, aimed at making Catalonia more competitive in a global financial environment.

In short, if research and development activities are a sign of an economy’s competitiveness, as well as its productive ecosystem, we can say that Catalonia enjoys some very privileged conditions. All together, Catalonia is a highly favourable environment to attract incoming investment, with competitive, sustainable and international surroundings and an economic model based on innovation and knowledge.


Josep-Maria Gascón, International Tax Manager, Solvay

Catalonia is one of the most attractive investment locations in the world and offers research related tax rebates that are the perfect tool to stimulate the development of open and collaborative innovation.

Short bio

Josep-Maria Gascón is one of Solvay’s leading tax lawyers with dual pan-European responsibility. His role at the global chemical and plastics group encompasses that of International Tax Manager at the company’s European headquarters in Belgium as well as the Head of Tax for Spain and Portugal.

Josep-Maria, who is graduated in Law from UPF (Barcelona), Masters degree in taxation from ESADE Business School and holds Pre-doctoral studies from University of Barcelona, is a frequent author and lecturer on tax issues. Josep-Maria is a Business Ambassador appointed by the Government of Catalonia.

Cost per researcher in different countries (gap with France)

United States: +89 %

Norway: +59 %

Japan: +48 %

Sweden: +48 %

Germany: +38 %

Canada: +34 %

Finland: +32 %

Belgium: +27 %

United Kingdom: +11 %

Italy: +10 %

France: 0

Austria: -1 %

Netherlands: -3 %

Singapore: -12 %

China: -42 %

Spain: -44 %

Hungary: -55 %

Morocco: -55 %

India: -58 %

References

International Comparison of Researcher Prices reported by Groups receiving Research Tax Credits”, prepared by ANRT-Association Nationale Recherche Tecnologie (France), July 2012

Catalonia is home to 60% of all U.S. companies based in Spain, 62% of French companies, 62% of German companies, 47% of UK companies and 70% of Japanese companies.

Catalonia in Business