Spain’s Patent Box Regime Aligned with BEPS Action 5

Spain's Patent Box Regime Aligned with BEPS Action 5

By Mario Ortega Calle (Partner, Garrigues, Madrid) and Laura Jiménez (Associate, Garrigues, Madrid)

Spain’s General State Budget for 2018, published by Law 6/2018 of July 3, 2018, in the Official Gazette, has amended the country’s patent box regime to bring it in further alignment with the “nexus approach” developed by the OECD under Action 5 of the base erosion and profit shifting (BEPS) project.

The main changes to the Spanish patent box regime, which grants a reduction to the taxable base for positive income obtained from the exploitation of certain intangible assets, will apply for tax periods beginning January 1, 2018. These changes are discussed below.


The most notable amendment introduced is the removal of know-how from the list of intangible assets eligible for this tax incentive. While patents remain in, reference to drawings or models, plans, formulas, or secret procedures, in addition to rights in information relating to industrial, commercial, or scientific experiences is replaced with “utility models, supplementary protection certificates for medicinal products and plant protection products, legally protected drawings and models, which derive from research and development and technological innovation activities, and advanced software that derives from research and development activities”.


The coefficient of the formula to determine the reduction is kept at 60 percent of net qualifying income derived from the licensing or transfer of the intangible assets, subject to the standard corporate income tax rate of 25 percent.

Qualifying income

Qualifying income is now calculated as the (positive) difference between the revenues (from licensing the right to use the assets and/or transferring them) and

  • The costs incurred by the company, directly related to the creation of the assets,
  • The amounts deducted in respect of their amortization, and
  • Any other cost directly related to these assets (if included in the corporate income tax base).


The reduction also applies to any losses obtained in a fiscal year if positive income of the same nature was obtained in earlier years and the patent box regime was claimed for that income. In other words, the full amount of these losses cannot be used to reduce the tax base until they exceed any income that has benefited from that regime. As regards BEPS Action 1, and in particular the provision of certain digital services, the Spanish Government has expressed its will to introduce legislation to tax this activity, and is due to send draft legislation to the Parliament for consideration within three months.

Such legislation will, most likely, be based on the European Commission’s digital services tax proposal issued in March this year, and will impose a three percent tax on revenues resulting from the provision of services such as the placing on a digital interface of advertising; the making available to users of a multi-sided digital interface and which may also facilitate the provision of underlying supplies of goods or services; and the transmission of data collected about users on digital interfaces.

Both measures (changes to the patent box regime and future introduction of a “digital tax”) are intended to further align the Spanish tax legislation with the guidance provided by the OECD in the 2015 BEPS final deliverables, and will undoubtedly have a significant impact for a large number of MNEs operating in Spain.

Mario Ortega, partner in charge of the Transfer Pricing Department at Garrigues’ Madrid office discusses Spain's Patent Box Regime Aligned with BEPS Action 5

Mario Ortega is the partner in charge of the Transfer Pricing Department at Garrigues’ Madrid office.  Mario was named in “Tier 1” in the 2014, 2015, and 2016 editions of “World Transfer Pricing.” He also lectures at Centro de Estudios Garrigues on various postgraduate programs and training courses on international tax law.


Laura Jiménez  is Associate, Transfer Pricing Department, at Garrigues’ Madrid office.