Once again, we return to the issue of deductions for Technological Innovation for the creation of proprietary software

Many of us tax advisors have insisted on the fact that to be economically competitive and to be able to attract companies with a high technological component, as is the case in the TravelTech sector, the application of the few tax incentives that exist must be made with due legal certainty.

It seems that reality goes the other way. In 2022, the National Court changed its criteria regarding the tax deduction for Technological Innovation activities for software development, determining that despite having a Binding Reasoned Report from the Ministry of Science and Innovation, these expenses do not correspond to an industrial design or engineering of production processes, which are the expenses that should be taken into account to calculate the deduction for Technological Innovation.

On 18 October 2023, a cassation appeal was admitted for processing by the Supreme Court in which it will have to decide whether the Tax Agency can deny a deduction for I.T., based on a report issued by the Agency’s own I.T. Support Team and therefore what role the Reasoned Report plays in all of this.

In our professional practice, we have always recommended having R&D and technological innovation deductions well-supported with reasoned reports because they are a mechanism to manage tax risks.

And what do we do until the Supreme Court rules?


Well, this will depend on the risk aversion profile of each company. Still, in our opinion, there are some basic recommendations that every company in the TravelTech ecosystem or any other industry with strong technological development should do:

  • For projects that have already been completed or are in progress, it is necessary to analyse what work has been carried out and what results have been achieved. In the case of an audit, software development from scratch would not be viewed in the same light as an update of a 2.0-style in-house development.
  • For future projects, the technical project managers should explain to the tax advisors what the work to be done will consist of, the time horizon, and the resources to be allocated to it.
  • Analyse the documentary support for the deductions reported in the corporate tax returns. If the company does not have a minimum defence of its tax credits, then the risk is at its highest. In our experience, we encounter this situation more often than we would like.

There is no doubt that the State needs to conduct a thorough review of the wording of the Corporate Tax regarding these tax incentives, as it is clearly too ambiguous and leads to situations that should never have been put on the table. If we are committed to technology companies, we must do so clearly and without legal loopholes. Otherwise, we will lose many opportunities that will go in search of the legal certainty that is so necessary for doing business.