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The Royal Decree-Law introduces the following new features in the area of corporate income tax:

1. Tax credit for activities aimed at technological innovation in production processes in the automotive industry’s value chain

With effect for tax periods commencing in 2020 and 2021, the rate of the tax credit for technological innovation activities goes from 12% to 25% for expenses in technical innovation activities resulting in a technological advancement in obtaining new production processes in the automotive industry’s value chain, or substantial improvements in pre-existing ones. To claim this tax credit, the taxpayer must obtain a reasoned report.

2. Unrestricted depreciation on investments made in the electric, sustainable or connected mobility value chain

The Royal Decree-Law introduces the possibility of taking unrestricted depreciation on investments made in 2020 in new tangible fixed assets (except for real estate) that entail the sensorization and monitoring of the production chain, as well as the implementation of manufacturing systems based on modular platforms or that reduce the environmental impact, used in the automotive industry. The maximum amount of the investment that may qualify for this unrestricted depreciation regime will be €500,000.

To apply this regime, taxpayers must meet the following requirements:

a) The total average headcount that existed in 2019 must be maintained for 24 months following the start of the tax period in which the acquired assets are placed in service. The total average headcount will be calculated by reference to the employees, within the meaning of the labor and employment legislation, taking into account the working hours in their contracts compared with the full-time working hours.

b) The depreciation will require the assets to have been placed in service. This placement in service must occur before the end of 2021.

c) Taxpayers must have a reasoned report issued by the Ministry of Industry, Trade and Tourism classifying the investment as eligible. Such report will be binding on the tax authorities.

If the application for the report is submitted in a timely manner and the report has not been issued on the date on which the tax return must be filed for a reason not attributable to the taxpayer, the regime may be applied provisionally.

If the investment is ultimately considered non-eligible or the obligation to maintain the headcount is breached, the taxpayer must pay over (in the tax period in which the report is notified or the headcount requirement is breached) the gross tax payable that would have applied to the amount over-depreciated, plus the related late-payment interest.

Entities that qualify for tax incentives for enterprises of a reduced size may elect to apply (i) the unrestricted depreciation regime provided for in article 102 of the Law, or (ii) this new unrestricted depreciation regime.