Technology

Tax for a tech company: patent box, R&D incentives and subscription VAT

Nextica Law & Tax handles the taxation of technology and product companies: the reduction for the licensing of intangibles under art. 23 of the Corporate Income Tax Act when own software is licensed out, the R&D deduction under art. 35 on development costs, the social security rebate for research staff and how the two combine, and the VAT place-of-supply rules for subscriptions sold to consumers across the European Union through the one-stop shop.

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Your biggest cost is the development payroll and your biggest revenue is subscriptions from half of Europe. Neither is solved by a local bookkeeper.

What's included

1. Analysing whether the intangibles developed by the company allow the licensing reduction to be applied, and what share of income is genuinely eligible.

2. Preparing the file supporting that reduction

identifying the asset, tracing development spend and the licence contracts.

3. R&D tax credits backed by a binding report, rather than by an internal view that will not survive an audit.

4. Analysing compatibility between the two regimes and with the capitalisation of development in the accounts, since all three rest on the same file.

5. VAT place-of-supply rules for digital services depending on who you sell to and from where, and one-stop-shop registration where applicable.

6. Reviewing international invoicing and withholdings on payments to foreign technology providers.

7. A tax calendar coordinated with the accounting close, because the three files —credit, reduction and capitalisation— are built from the same data.

THREE FILES THAT REST ON THE SAME PAPERWORK

The tax credit, the intangibles licensing reduction and the capitalisation of development in the accounts are built from the same documentation. Without it, all three fail.

Intangibles licensing reduction applied without identifying the asset or tracing development spend: the reduction requires the intangibles to have been created by the company itself in the proportion the rule sets, and that is shown with the file, not with the profit and loss account.

art. 23 Corporate Income Tax Act

R&D tax credit without a binding report

in software the line between evolutionary development and technological innovation is crossed easily, and without a report the credit is challengeable retrospectively for the open years.

art. 35 Corporate Income Tax Act

VAT on subscriptions sold across Europe settled as if everything were domestic

the place-of-supply rules depend on who you sell to and from where, and the adjustment arrives with a surcharge once the volume is already large.

VAT Act

Frequently asked questions

We license our software to clients. Does the patent box apply to us?

It can apply, but not automatically. The relief under art. 23 of the Corporate Income Tax Act requires the licensed intangible to be one the rule admits, that the company developed it —the benefit is calculated in proportion to its own development spend— and that the licensing income is separated and documented in the accounts. It is a decision prepared before signing the licence agreement, not when filing the return.

We sell subscriptions to consumers in several EU countries. Where is VAT due?

For electronically supplied services to consumers, VAT is due in the customer's country once the common distance-selling threshold is exceeded. To avoid registering in each Member State there is the one-stop shop, which allows everything to be declared from Spain in a single periodic filing. What must be in order is the evidence of where each customer is located, because that determines the applicable rate.

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