The following includes a brief description of certain tax incentives that have not been specifically created for the renewable energies sector. Careful tax planning is therefore required to take advantage of these tax incentives.
Reduction of income from certain intangible assets
The income derived from the license of the right to use or exploit certain intangible assets as defined in article 23 of CIT Law, shall be included in the CIT taxable base with a 50 percent reduction, and provided certain requirements are met. This 50 percent reduction shall not be applicable for the tax period following that when the total income derived of the license of each intangible asset that has benefited from the reduction, calculated from the date on which the license is issued exceeds six times the cost of the intangible created.
Corporate Income Tax (CIT) credit for investments in assets to protect the environment
Article 39 of the Spanish CIT supports investments in fixed assets aimed to protect the environment, including facilities designed to avoid atmospheric or acoustic pollution from industrial installations, or water pollution. An eight percent tax credit is granted for any investment included in programs, arrangements or agreements entered with the environmental public authorities of regional governments.
Tax credits may be carried forward to the following tax year if they have not been applied in a given fiscal year and have not been used in that fiscal year because the tax due was insufficient.
Research & Development Corporate Income Tax credits
R&D tax credits
The tax credit base shall consist of the amount of research and development expenses and, if applicable, investments in tangible fixed assets and intangible assets, excluding real estate and land. Tax credit rates are set at 30 percent of the expenses incurred in the tax period for this purpose. In the event that the expenses incurred in pursuing the R&D activities in the tax period exceed the average of those incurred in the two preceding years, the rate established in the preceding paragraph shall apply up to that average, and 50 percent to the amount by which that average is exceeded.
Technological innovation activities tax credits
The tax credit base shall consist of the amount of the expenses incurred in the technological innovation activities. The tax credit rate is 12 percent.
R&D and Technological innovation activities tax credits which have not been applied in a given fiscal year and which have not been used in that fiscal year as the tax due was insufficient may be carried forward to the following 18 tax years. In addition to that, in case tax due is insufficient for the application of these tax credits, a cash refund in the amount of the pending tax credits can be requested to the Spanish Tax Administration, with a discount of 20 percent of the amount of the pending tax credits (i.e. the payment in cash implies a reduction of the pending amount of the tax credit).
Capital duty exemption
As a result of the modifications introduced by RD 13/2010, Spanish Transfer Tax Law foresees an exemption of the Capital Duty regarding:
- incorporation of companies
- share capital increase
- contributions of shareholders that do not constitute a share capital increase
- transfer to Spain of the office of effective management of a company not previously located in the EU.
Tax allowances on local taxes
For certain local taxes such as construction and urban canon, tax allowances could be determined at the local level. These tax allowances would depend on each local authority, and should be negotiated on a case-by-case basis.
Taxes on Energy
Taxes on electricity generation
These taxes are not strictly environmental taxes. Revenues which will arise from them will finance the Spanish deficit of the cost of generation and distribution of electricity.
- Tax on electricity generation.
- Tax on spent nuclear raw and radioactive waste.
- Tax on spent nuclear raw and radioactive waste storage.
- Fee on use of continental waters to generate electricity (hydroelectricity generation).
Law 15/2012 has also established that the electrical energy attributable to the use of fuels in facilities that use any of the non-consumable renewable energies as primary energy shall not be subject to a premium-based economic regulation. This affects solar-thermal installations in particular.
Remuneration of energy production facilities under the special regime has been recently revised through Royal Decree-Law 9/2013, which entered into force on Sunday July 14. Such Royal Decree-Law comprises the main following provisions:
- The amendment of Article 30.4 of the Electricity Sector Law, which basically provides that:
- The new remuneration framework of special regime facilities (including facilities in operation) will be established by Royal Decree issued by the Council of Ministers.
- In addition to the compensation for the sale of energy valued at market price, facilities may receive a "specific remuneration consisting of a term per unit of installed capacity, to cover, where appropriate, the investment costs of a typical installation that cannot be recovered from the sale of energy and a term per operation, if applicable, to cover the difference between operating costs and revenues for the market share of such typical installation".
The regulated tariff regime, for a given period and updatable according to a prefixed formula, is consequently abolished.
- In order to calculate the specific remuneration of a typical installation, it is necessary to consider, "over its regulatory life" and referring to the activity of an "efficient and well-managed company":
- Standard revenues from the sale of energy generated, valued at the market price of production.
- Standard operating costs.
- Standard value of the initial investment.
Therefore, the determination of these parameters or assumptions will be critical in order to assess the remuneration for each installation. It will be necessary to wait for the approval of Royal Decree.
- The costs or investments that are made in connection with rules or acts which are not applicable throughout all of Spain (i.e. regional authorizations and registrations) will not be taken into account. Also, the costs and investments that do not respond solely to the activity of electricity production.
- The introduction of an additional first provision, called "reasonable return on production facilities entitled to economic premium regime" which, as explained by the Minister, will mean that, as of July 14, 2013, special regime facilities shall receive a "supplement for their investment costs based on standards by technologies", according to a cost formula of 10-year Treasury + 300 basis points, representing a return of 7.5 percent.
- The above-mentioned return is "before taxes" and may be revised every 6 years.
- The repeal of the following provisions:
- Royal Decree 661/2007, of May 25.
- Royal Decree 1578/2008 of 26 September.
- Article 4 and paragraph 2 of the fifth transitional provision of Royal Decree-Law 6/2009, of April 30.
- To maintain compensation flows to facilities, such repealed rules shall apply temporarily, except for certain aspects, pending the approval of the Royal Decree with the new regulation. Thus, the facilities will continue receiving the current compensations under the transitional provisions commented above subject to regularization with the new methodology as of July 14, 2013.
- Two immediate measures to reduce the costs of the electricity system are approved. The efficiency complement to facilities that were receiving it under Article 28 of Royal Decree 661/2007 is abolished, as well as the reactive power bonus of article 29 of the same regulation.
Currently, it is been processed the enactment of the Proposal of Royal Decree passing the regulations of the activity of electricity generation through renewable sources, cogeneration and wastes.
Additionally, new Renewable RD foresees the drafting and enactment of a new Ministerial Order that shall set the new remuneration parameters of the existing installations. Such Order is currently being processed too.