9.9.2.1. Allocations to the reserve for investments in the Balearic Islands

For tax periods beginning between 1 January 2023 and 31 December 2028, taxpayers who carry out economic activities and determine their net income using the direct estimate system will be entitled to a deduction in the total tax for the net operating income that is allocated to the Reserve for Investments in the Balearic Islands, provided that they come from economic activities carried out through establishments located in the Balearic Islands.

Amount

The deduction will be calculated by applying the average aggregate tax rate (state and regional) to the annual allocations to the reserve that come from the net operating income of the year.

Limit

The deduction for allocations to the Investment Reserve may not exceed 80% of the part of the full tax rate that proportionally corresponds to the amount of net operating income from establishments located in the Balearic Islands.

Requirements and conditions

The taxpayer must determine the net income of its economic activities using the direct estimation method.
The income must come from economic activities carried out through establishments located in the Balearic Islands.
The investment reserve must be shown on the balance sheets in a completely separate and appropriate manner and will be unavailable as long as the assets in which it was materialized remain in the company.
They must keep accounting records in the form required by the Commercial Code and its implementing regulations from the year in which the profits intended to provide the investment reserve were obtained until the year in which the assets subject to the investment must remain in operation.

Until the investment maintenance period is met, they shall record in the report the information relating to the provisions made, the reserve pending materialisation, the amount and date of the investments, the amount and date of the investments in advance of the provision, any other tax benefit obtained on the occasion of each investment and the reliable declaration on the amount of the subsidies or other support measures, the de minimis aid received during the two previous fiscal years and, when the reserve materialises, that no other State aid has been applied, the concurrence of which would exceed the limits established in the Community regulations that are applicable in each case.

Taxpayers who are not required to keep annual accounts must keep a record book of investment assets, which must include the above information. In investments in transferable securities, until the maintenance period is met, the amount and date of the investments made that represent the materialization of the reserve provided by the entity subscribing to its shares or participations, as well as the years during which they must be kept in operation, must be recorded in the report.
The amounts allocated to said Reserve must be materialized within a maximum period of three years from the date of accrual of the tax corresponding to the year in which it was provided, in one of the following investments:
1. The acquisition of tangible or intangible fixed assets, assets that contribute to the improvement and protection of the environment in the territory of the Balearic Islands, in the terms determined by regulation, as well as research and development expenses derived from research, development and technological innovation activities referred to in article 35.1 and 2 of Law 27/2014, of November 27, on Corporate Tax.
  
  In the case of land, whether built on or not, it must be allocated to certain activities.
  
  In the case of intangible fixed assets, the reservation may not be materialized in trademarks or non-patented knowledge, under the terms determined by regulation.
  
  In the case of maritime passenger transport elements, they must be dedicated exclusively to public services within the scope of functions of general interest that correspond to the public needs of the Balearic Islands.
  
  In the case of road passenger transport vehicles, the company must have its tax domicile in the territory of the Balearic Islands.
2. The creation of jobs directly related to the investments planned in letter A, which occurs within a period of six months from the date of entry into operation of said investment.
3. The subscription of shares or interests in the capital issued by companies as a result of their incorporation or capital increase that carry out their activity in the archipelago, provided that certain requirements are met.
The assets in which the investment is made must be located or received in the Balearic archipelago, used therein, and affected by and necessary for the development of the taxpayer's economic activities, except in the case of those that contribute to the improvement and protection of the environment in the Balearic territory.
The amount of the materialization will be understood to be the acquisition price or production cost of the assets, excluding interest, indirect state taxes and their surcharges, and may not exceed their market value.
Materialization will be deemed to have occurred, even in cases of acquisition through financial leasing, at the time when the assets become operational.
When the reserve has materialized in the investments referred to in letter A of number 5 and in letter C, they must remain in operation for at least five years, without being transferred, leased or assigned to third parties for their use. If its useful life is less than this period, this requirement will not be considered to be breached when another asset is acquired to replace it at its book value, within six months of its removal from the balance sheet, which meets the requirements for applying the reduction provided for in this section and which remains in operation for the time necessary to complete this period.

This new acquisition cannot be understood as the materialisation of the amounts allocated to the reserve for investments in the Balearic Islands, except for the amount thereof that exceeds the net book value of the asset being replaced and which was considered the materialisation of the reserve regulated in this section. In the case of land acquisition, the period will be ten years.

In cases of loss of the asset, it must be replaced under the terms provided in the previous paragraph.
Taxpayers engaged in the economic activity of leasing or transferring assets to third parties for their use may benefit from the investment reserve regime, provided that there is no direct or indirect link with the lessees or transferees of said assets and that the operations are not financial leasing.
The use of the investment reserve before the investment maintenance period or for investments other than those planned, as well as the failure to comply with any other of the established requirements, will result in the loss of the deductions made, and the taxpayer will be obliged to add to the state net quota and the autonomous or complementary net quota accrued in the year in which the requirements were not met, the amounts unduly deducted, plus the corresponding late payment interest.

Incompatibility

The deduction for Investment Reserve is incompatible for the same assets and expenses with the deduction for investments in article 68.2 of the Personal Income Tax Law.

It is also incompatible for the same assets and expenses with any tax benefit or measure of a different nature that has the status of state aid under European Union law, if such accumulation exceeds the limits established in the Community legislation that, in each case, are applicable.

Anticipated investments of future endowments

Taxpayers may make advance investments of future allocations to the investment reserve, provided that they meet the remaining requirements established therein and the aforementioned allocations are made from profits obtained in the tax period, or in the three subsequent periods.

The aforementioned materialization and its financing system will be communicated together with the personal income tax return for the tax period in which the advance investments are made.