Documenting a research and development project involves outlining the technical challenges, the activities carried out, and the resources associated with that work. Xènia Carballo, Account Manager at Leyton at the time of the interview, spoke with Edgar Guerrero about how to identify innovation opportunities and prepare the necessary justification. Chapter 25 of Toque de Ingenio connects the management of incentives with a practical need for industrial companies: maintaining evidence of their product, process, and technology projects.
Guest: Xènia Carballo, Account Manager for Leyton as of October 2024.
Interview published: October 28, 2024. Episode: 25. Duration: 1 h 28 min.
In this episode:
- Why developing products or improving processes can lead to a review of R&D opportunities.
- What is the role of technical documentation, the costs, and the people involved in the project?
- How to prevent our working memory from relying solely on what we remember from years ago.
The conversation was published in October 2024 and includes tax-related references specific to that context. This article outlines the learnings regarding organization and documentation. The possibility of applying an incentive depends on the project, the company’s situation, and the relevant regulations; an engineering activity is not automatically classified as “innovative.”
Research and development projects beyond the image of the laboratory.
Xenia explains that some companies associate research and development solely with laboratories or major discoveries. This perception can lead them to overlook technical activities they are already carrying out within their business.
During the interview, three key areas are identified to begin exploring opportunities: product, process, and system. These represent a way to structure the questions being asked, rather than an automatic tax classification. The team needs to understand what has changed, what technical difficulties existed, and what work was carried out to resolve them.
The purchase of equipment and a specific development do not necessarily represent the same activity. Similarly, all commercial improvements do not necessarily involve technological innovation. This episode demonstrates the need to clearly define the project before discussing figures or incentives.
In product design and development, That level of detail begins with the problem and the requirements. Identifying versions, testing, and decisions helps to explain the technical process. This information is useful for managing the project, even if no specific tax benefits are ultimately realized.
To isolate an opportunity from its final assessment.
Edgar asks how a company can determine if it has something worth investigating. Xènia suggests reviewing investments and development activities, but emphasizes that a more refined analysis and a thorough understanding of each individual case are necessary afterward.
Their approach doesn’t involve simply assigning a deduction to any cost. The interview distinguishes between different concepts and explains that the conditions can vary depending on the company’s situation and the incentives being considered. This nuance is particularly important when a conversation uses examples to make a complex topic accessible.
As an official reference, the Tax Agency (Agencia Tributaria) specifies that the deduction for research, development, and technological innovation is outlined in Article 35 of the Corporate Income Tax Law, explaining that its calculation is linked to the corresponding expenses and investments. The classification and requirements should be reviewed in the relevant source for each tax year. Tax Agency Information.
For the technical team, the most valuable contribution is to clearly describe what has been done. Tax valuation requires a specific analysis. Separating these responsibilities allows engineering and advice to work with a common foundation and with clear questions.
Technical documentation: maintaining the project’s progress.
One of the errors Xènia observes is calculating a figure without adequately preparing the documentation explaining the project. While the company may be aware of the work that has been done, it will need organized evidence to reconstruct it later.
The difficulty is expressed in a phrase from the conversation:
“If it’s not documented”.
Xenia Carballo 1:04:12.
The objectives, activities, people, and results should be able to be linked together. A list of invoices, by itself, does not describe the technical challenge, just as a technical explanation without traceability of resources can leave questions unanswered.
Within an industrial company, maintaining this relationship can be supported by documentation that the project already requires: specifications, versions, test records, and decisions. The key is to keep it organized and linked to the specific work, with a level of detail that is useful for anyone who needs to review it.
People, collaborations, and associated costs related to development.
The interview dedicates a section to the resources involved in a project. Xènia comments on the work of internal staff and the participation of people from various departments. Edgar also asks about external developments and collaborations.
The conversation encourages us to observe who participates and what activities they undertake. One person can intervene in the initial definition, in testing, or in follow-up, even if they are not part of the core design team. This doesn’t mean that every moment is suitable; it demonstrates that the organization needs to understand the actual contributions being made.
For projects of Electronic engineering Mechanical development, and the coordination between different disciplines, makes traceability particularly useful. The requirements for a system can generate work in design, programming, integration, and validation, with dependencies between teams.
The economic documentation must relate to the activity being described. Estimating resources without a clear basis makes review and internal management more difficult. The situation emphasizes the need to prepare a technical-economic report, which allows both parties involved in the project to understand each other.
Prototypes and testing as evidence of development.
Although the interview focuses on incentives, the topic has a direct relationship with prototyping. Testing allows us to observe how uncertainty has been addressed and what decision was made based on its outcome.
The documentary value isn’t in simply collecting photographs of samples without context. It’s far more useful to explain what was being tested, what conditions were used, and what changed as a result. This information also helps the team to avoid repetition and maintain continuity between stages.
In Functional prototyping and component manufacturing., Identifying the objective of an iteration facilitates communication between the designer, the manufacturer, and the validator. The component is understood as part of a development process, with a defined function within the project.
This reading focuses on technical management procedures. It doesn’t state that every sample, test, or piece must have a specific tax treatment. Instead, it provides a clear method for documenting the work carried out and for facilitating subsequent analysis.
Prepare the review before the end of the financial year.
Xènia describes situations where documentation is attempted to be reconstructed belatedly, or is assumed to exist because the company’s activities are already perceived as innovative. However, a general overview of the business doesn’t replace a detailed explanation of a specific project.
The memory should incorporate its specific details, even if the company develops numerous technical solutions. It’s also important to record scope changes: a project can evolve, and its actual activities may not precisely match the initial concept.
The guest reminds us that:
“You always have to act with consistency.”
Xenia Carballo 53:45.
That coherence connects objectives, activities, and costs. It allows for a review based on better information and prevents turning the end of the financial year into an attempt to recall scattered decisions scattered across emails and people.
Questions regarding project documentation for innovation.
Is every product development process automatically considered R&D for tax purposes?
No. The interview is intended to identify activities that require review, but the assessment depends on their characteristics and the applicable regulations. The technical description of the project should allow a specialist to study the specific requirements.
What information is it important to keep during an industrial project?
The initial challenge, the activities carried out, the decisions made, the people involved, and the related resources. It’s beneficial to link the evidence and versions with their objective and their outcome. This preserves the development process and makes it easier to review later.
What does an engineering firm contribute to that documentation?
You can provide specifications, deliverables, test records, and an explanation of technical decisions within the scope of the contract. This information helps to understand the project; the incentive evaluation corresponds to the specific tax analysis.
Four key lessons for managing a technical project.
- Identify the specific challenges and activities associated with each development, without relying on generic labels.
- Maintaining technical documentation while working.
- Linking resources and costs with specific activities.
- Distinguishing between the engineering evidence and the project’s tax valuation.
At i-mas, product design, electronics, and industrial automation are defined through requirements and deliverables. If you need to develop a solution and structure its stages, you can Please explain your engineering project to us. To define the technical work involved.
To continue reading: How Aridditive transforms 3D printing with concrete into an industrial process..
Sources of the article: Interview with Edgar Guerrero featuring Xènia Carballo, published on October 28, 2024, and official reference from the Tax Agency, linked within the text. The quotes are linked to the video; the examples of technical organization are an editorial synthesis from i-mas.
