Legal certainty is the main problem for innovation in Spain. It is not a new problem, but precisely because of this very fact and because of the urgency of the context, marked by the challenge of knowing how to channel European recovery funds, it is now becoming more pressing. Investments in research and development (R&D) and technological innovation (IT) activities need a predictable framework rather than new instruments or financing channels.

With the aim of providing legal certainty to the application of deductions for R&D and IT activities, in 2003 a binding voluntary review mechanism was enabled by Royal Decree: the Motivated Report. This route became the standard for companies to access with guarantees to have incentives to make investments in I D I. According to the latest report published by the Ministry of Science and Innovation, the applications submitted in fiscal year 2019 amount to 9,606, being the majority UNESCO code Computer Science, with 2,215 Reasoned Reports issued.

The Motivated Report accredits the cataloging of R&D and IT activities and is carried out by an entity accredited by the National Accreditation Entity (ENAC), being a technical expert at the level of 6 UNESCO codes who carries out an expert opinion on the qualification of the activities such as I D I; reports whose pronouncement on this point is binding for the Tax Agency (AEAT), as established by Royal Decree 1432/2003 itself and the LIS in its article 35. The report stipulates the activities related to the technical concepts of base of deductible expense for Technological Innovation (Article 35.2.b of the LIS), that is: technological diagnosis activities; industrial design and production process engineering; acquisition of advanced technology; and obtaining the certificate of compliance with quality assurance standards. There is, therefore, solid legal and technical support so that there are no doubts for any company that once the accreditation of its innovative activity has passed, the corresponding expense may be deducted.

However, it has been too long since this has happened. The Tax Agency, in an inspection procedure, requalifies the activities subject to deductible expenses, contradicting the Motivated Report and contravening current regulations. The AEAT enters as a referee of last resort to review a play already called with a regulation that only it knows. It is an unfair procedure, due to its unpredictability, which harms any company that decides to bet on innovation and which renders meaningless the legislator’s intention to promote safe mechanisms to promote investment in R&D.

In fact, there is already a notable body of jurisprudence against this inspection procedure that underlines the binding nature of the Reasoned Report. We highlight three: Supreme Court ruling of March 1, 2016, TS 660-2016; Judgment of the National Court of July 4, 2019, contentious-administrative appeal 346/2015; Judgment of the National Court of July 7, 2021.

This problem, already entrenched in the science, technology and innovation system of our country, is now especially incomprehensible. The commitment to the transformation of the economic system through digitization and the ecological transition needs a favorable framework since Spain starts from a disadvantaged position. The Innovation Scoreboard 2021 of the European Commission places Spain in the 21st position, losing one position compared to 2020 and far from Portugal, France or Italy in innovative activity.

In parallel, various technical studies have analyzed the effectiveness and barriers of applying tax deductions to investments in R&D and IT. The Spending Review of AIReF and the White Paper on Tax Reform of the Institute of Fiscal Studies at the request of the Ministry of Finance stand out. Both reports agree that the deductions are effective in their objective of promoting investment, but in their processing there are redundancies and a lack of administrative agility, and above all, legal certainty in the application of these incentives.

There is a general conviction that legal certainty is the key to allowing the innovative fabric of the country to explore its potential. We believe that protecting the binding nature of the Reasoned Reports and the certification obtained by the Ministry of Science and Innovation is not only correct, it is necessary.