Locating your Intellectual Property (IP) rights in Spain is certainly rewarded. Since January 1, 2008, the granting of the right to use or exploit certain intangible assets can benefit from a 50% reduction of the applicable Spanish Corporation tax rate. This leads to an effective rate of 15% for companies subject to the standard Corporation tax rate.
It is required that the Spanish company granting the right to use has created the intangibles. This excludes from this tax relief those intangibles that have been purchased by the Spanish company and ceded, at a later point in time.
And which are those intangibles? The regulations set forth a numerous clauses, including patents, models, drawings, maps and know-how. This requires a previous checking of whether the right that is granted falls within the scope of the tax relief.
The assignee can be either a Spanish or a non-Spanish tax resident, except for the case where it resides in a territory qualified as a tax haven (or territory with null taxation). It can also be a tax related party, (a tax definition, typically referred to Companies belonging to the same Group). But, in any case, it is required that the assignee uses the rights granted for the development of its economic activity.
In the event that both the assigner and assignee belong to the same group of companies, this special tax relief offers a significant tax advantage since it can ultimately imply that only 50% of the income is taxed whereas 100% of the expense can be deducted within the group, as shown in the chart below:
Assigner and assignee ? Spanish tax residents
Consideration for the right to use ? 1.000,00 €
Standard Spanish Corporation tax rate ? 30%
Taxation in Company A (= assignor) ? 150,00 €
Tax deduction in Company B (= assignee) ?(300,00€)
Net effect at Group level ? (150,00€)
This reduction cannot be regarded on a stand-alone basis, since there are other jurisdictions that offer tax regimes that could easily compete with the Spanish one. However, if we combine it with the Research & Development tax credits (as informed in a previous post) provided for in Spanish Corporation tax regulations, it goes without saying that Spain can definitively offer an attractive tax regime to locate your IP rights.