Tax incentive for the new clean technologies: advanced software may also benefit
José María Cobos, partner in Tax department.
The latest corporate income tax reforms have embraced digital initiatives, which is reflected in the enhancements made to tax incentives geared towards encouraging R&D&I activities in the field of software. What is felt to be missing, however, is a move to further the tax incentives for digital initiatives aimed at encouraging energy efficiency, ecoinnovation, sustainable mobility or climate change.
Actually, until 2014 there used to be a tax credit for environmental investments to reduce atmospheric emissions or reduce polluting discharges to waters, and for the recovery and treatment of industrial waste. But the 2015 tax reform did away with this tax benefit.
That reform did, however, bring an enhancement to the tax credit for R&D activities in the digital field. In that, starting in 2015 the definition of R&D activities was broadened to include the creation, combination and configuration of advanced software, through new theorems and algorithms or operating systems, languages, interfaces and applications used to prepare new or substantially enhanced products, processes or services.
Elsewhere, the patent box tax regime has been amended, starting in the tax periods that began on or after January 1, 2018. Until then, computer programs had specifically been left off of the list of intangibles able to benefit from this tax incentive. Moving in the opposite direction, this recent reform has enhanced the incentive by placing on that list any registered advanced software coming out of research and development activities.
This advancement in digital initiatives, however, has not been mirrored in the environmental field, despite one of the specific objectives set by the Seventh Framework Programme for Research and Technological Development being to “contribute towards promoting growth, sustainable development and environmental protection, including by addressing the problem of climate change”. In actual fact, a specific line is established for the environment and climate change, having as its goal sustainable management of the environment and its resources through the advancement of knowledge on the interaction between the climate, biosphere, ecosystems and human activities, and the development of new technologies, tools and services, in order to address global environmental issues in an integrated way. With this aim in sight, emphasis is placed on prediction of climate, ecological, earth and ocean systems changes, on tools and technologies for monitoring, prevention, mitigation and adaptation of environmental pressures and risks, including risks to health, and on tools and technologies for the sustainability of the natural and man-made environment.
Consequently, it would be desirable to have enhanced tax incentives for any activities aimed at environmental innovation, particularly in the case of strategic environmental projects, including those geared towards slowing climate change, or towards ecoinnovation, energy efficiency and sustainability or sustainable mobility.