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The National Court changes its criteria on the expenses made in software projects

10 February, 2023

The National Court (The “NC”) through the sentences published in November and December 2022 (Sentences 5529/2022, 5537/2022) changes the criteria that it had been maintaining on the expenses related to the development of computer applications (software).

The deduction for technological innovation activities established in article 35.2 of the Corporate Tax Law establishes that the base of the deduction will be constituted by the amount of the expenses of the period that correspond to an appraised list of certain concepts, among which are include “industrial design and production process engineering”.

The National Court concludes in said sentences that the expenses incurred in the development of computer applications are not subsumable in the concept of "engineering of production processes" in order to be included in the deduction base even though the project to which they correspond has deserved the qualification of IT by the Ministry of Science and Information. The modification of the criteria is due to the refinement of the meaning of the concept of «engineering of production processes».

In other words, the expenses for the development of applications and "software" cannot be included in the deduction base, since they neither correspond to the concept of "industrial design", with few exceptions, nor to the concept of "engineering of production processes", which is considered a specialized discipline focused on the productive activity of the company and which does not include the development of computer tools, except in special cases.

The NC considers that the concept of "production processes" is only possible in the industrial sector, even when the innovative nature of the project is certificated by the Ministry of Science and Information.

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