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Form 200. Corporate Income Tax Declaration 2018

4.3.2.2 Requirements

These taxpayers will be entitled to a reduction in the tax base of 10 percent of the amount of the increase in their own funds, provided they meet the following requirements:

  • That the amount of the increase in the entity's shareholders' equity remains steady for a period of 5 years from the end of the tax period to which the reduction corresponds, unless there are accounting losses in the entity.

    The amount of said increase will be determined by the positive difference between the own funds existing at the end of the year without including the results of the year, and the own funds existing at the beginning of the year, without including the results of the previous year, and without taking into account certain concepts.

    However, for the purposes of determining this increase, the following will not be considered equity at the start and the end of the taxable period:

    • Contributions by partners.

    • Increases in capital or equities due to offsetting of credits.

    • Increases in own funds through operations with own shares or restructuring.

    • Legal or statutory reserves.

    • The unavailable reserves that are provided by application of the provisions of article 105 of this Law and article 27 of Law 19/1994, of July 6, modifying the Economic and Fiscal Regime of the Canary Islands.

    • Own funds corresponding to an issue of compound financial instruments.

    • The own funds that correspond to variations in deferred tax assets derived from a decrease or increase in the tax rate of this Tax.

    These items will not be taken into account to determine the maintenance of the increase in own funds in each tax period in which it is payable. The capitalization reserve provided will be taken into account for the purposes of determining the increase in own funds and the maintenance of such increase, in accordance with the provisions of article 25.2 of the LIS . Therefore, the capitalization reserve provided will be part of the own funds existing at the beginning and at the end of the year in the same way as the rest of the items that make up such funds that are not excluded for the purposes of determining its increase and subsequent maintenance thereof.

  • That a reserve be established for the amount of the reduction, which must appear in the balance sheet with absolute separation and appropriate title and will be unavailable during the period provided for in the previous paragraph.

    For these purposes, it will not be understood that the aforementioned reserve has been disposed of in the following cases:

    • When a partner or stockholder exercises his right to separate from the company.

    • When the reserve is eliminated, totally or partially, as a result of operations to which the special tax regime established in Chapter VII of Title VII of the LIS applies.

    • When the entity must apply the aforementioned reserve by virtue of a legal obligation.