Thursday, the 22 of October, Barcelona Science Park (PCB) hosted the 8th session of 'Lessons Learned' series: 'Biofiscalitat: els incentius per a la ciència', an initiative of CataloniaBio and Biocat to foster knowledge and networking among professionals in the field of life sciences. On this occasion, the aim of the event was to gain further insight and analyze the tools to overcome the regulations and red tape governing the taxation regimen of biotechnological and biomedical companies which hamper R & D.

Six professionals from complementary areas such as entrepreneurship, law firm, certifying entity and the Treasury department, explained their ‘lessons learned’ in a conference moderated by Anna Rosell, economist and director of the Fiscal area of IMB Group. The conference featured guest speakers: Diego Rodriguez, attorney at law at J&A Garrigues; Immaculate Torés, commercial technician in R & D + I certification at EQA; Xavier Castells, Chief Financial Officer at InKemia IUCT Group; Miguel Ángel Mayo, coordinator of the Treasury Department Technicians Union (Gestha), and Ignasi Belda, CEO of Intelligent Pharma, located at PCB.

In Catalonia there are few tax deductions left for biotechnology and biomedical companies, and one of these is relief for R + D + I. “Biotechs have significant support in R + D + I, but they are not always used to their favor due to a lack of planning or tax advice. This issue should be included as part of the economic and financial strategy of the company” , suggested Anna Rossell.

The budgetary provision allocated by the Spanish Government to R & D & I is 640 million euros in 2015 and 693 million euros in 2016, according to data from Gestha. Compared with other countries around the world, “the deductions that we have are generous. R + D + I is not only written off from our accounts, but also we get it paid back,” explains Diego Rodriguez, attorney at Garrigues. Spanish law defines three concepts -Research (R), Development (D) and Technology Innovation (Y) – that provide entitlement to tax credit: a 25% deduction in R & D, a 17% in qualified research staff costs, an 8% in investments in assets aimed at R & D, and a 12% in innovation. The possible questions for the company, according to Rodriguez, are “to know what R + D + I means and to prove to the Administration that research is in fact conducted” (the Law establishes mechanisms to prevent this such as binding consultations,  motivated reports, or previous evaluation agreements).

The successes behind Patent Box

One of the tax incentives that is having a lot of acceptance in the innovative business fabric was started  back in 2008. The Patent Box allows companies to obtain a 60% reduction in corporate tax on certain revenue derived from intellectual property, licensing, patents, etc.

According to Diego Rodriguez from Garrigues “there is some competition between countries. We simply have copied from elsewhere and is working well.” Xavier Castells from InKemia believes that “the implementation is positive for as long as it yields a profit” and Ignasi Belda, CEO at Intelligent Pharma, thinks that “many companies such as CROs think that if they have no patents they are therefore not eligible to the Patent Box and that is not true. Tax relief may be awarded for knowledge, formulas, plans or other means. Because of this, the term should be referred to as Innovation Box. If you have any doubts, you can always run a binding consultation. “

The doubts and decisions that emerge shape the fiscal strategy of each company. This is the opinion of InKemia´s CFO, a Catalan biotechnology company with subsidiaries in Colombia and Brazil. “The first tax decision to know which category you fall into because there are constraints, both for potential investors and the company” further explains Xavier Castells. Castells notes that few biotech SMEs take into account their corporate income tax relief when they elaborate their accounts: “A value is given to assets held in financial institutions, suppliers and other stakeholders and, you can even change from losses to profits.” To be compatible, or better to say, “eligible” to that revenue tax write off, the company must have been recognized as an ‘innovative SMEs‘, which means it needs to be accredited as such by the Ministry of Economy and Competitiveness.

Myths and legends

Entrepreneur Ignasi Belda, who has been applying the maximum tax relief envisioned by the law since 2007, explained some of the myths and urban legends that he has been listening to over the years. For example, if a biotech project fails to come through “you can still continue applying the R & D tax write off in contrast to what many businesses think”.

Despite being one of the best countries in the world in incentives for R & D, “there are other very powerful countries such as France to which you can also apply even if you are not based in the country. We have become accredited by the French Ministry of Research and Universities and our customers benefit from a 30% write off their bills. It is very easy to do. “Belda is clear: “If we do not apply these write offs, we are loose competitive advantage over France, Germany or the Netherlands where companies use the law with full power”.