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Form 200. Corporate Income Tax Declaration 2018

8.7.1 Requirements and particularities

Article 94 of Law 20/1991, of June 7, establishes that companies and other legal entities subject to Corporation Tax, with tax domicile in the Canary Islands, may, starting with the first financial year closed after December 31, 1991, and in relation to investments made and remaining in the Archipelago, benefit from the deduction regime provided for in Article 26 of Law 61/1978, of December 27, on Corporation Tax, in accordance with the following peculiarities:

  1. The rates applicable to investments made will be 80 percent higher than those of the general regime, with a minimum differential of 20 percentage points.

  2. The deduction for investment in the Canary Islands will have as a maximum limit the percentage indicated below of the net quota resulting from reducing the total quota by the amount of the deductions for double taxation and, where applicable, the bonuses provided for in article 25 of Law 61/1978, of December 27, on Corporate Tax. This percentage will always be 80 percent higher than that set for each modification of the deduction for investments in the general regime, with a minimum differential of 35 percentage points. The deduction limit is therefore set at 60 percent of the net tax rate for the tax period, which rises to 90 percent when the amount of the deduction for research and development activities, corresponding to expenses and investments made in the tax period itself, exceeds 10 percent of said net tax rate.

Note:

With effect for tax periods beginning on or after 7 November 2018, Law 8/2018 of 5 November modifies the Fourth Additional Provision of Law 19/1994 of 6 July 1994 on the deduction for investments in the Canary Islands to raise the joint limit on the tax on the islands of La Palma, La Gomera and El Hierro, increasing the minimum limit from 80% to 100% and raising the minimum differential from 35 to 45 percentage points, provided that the Community regulations on state aid allow it and the investments are covered by Law 2/2016 of 27 September and other laws on measures to regulate the economic activity of these islands. The deduction limit is therefore set at 70% of the net tax rate for the tax period, which is raised to 100% when the amount of the deduction for research and development activities, corresponding to expenses and investments made in the tax period itself, exceeds 10% of said net tax rate.

The deduction regime for investments of article 94 of Law 20/1991 will also apply to companies and other legal entities that do not have their tax domicile in the Canary Islands, with respect to permanent establishments located in this territory and provided that the corresponding investments are made and remain in the Archipelago.

In this case, the maximum deduction limit on the net quota referred to in article 94.1.b) of Law 20/1991 will be applied independently of that corresponding to investments under the general regime.

This criterion will also apply to investments made in mainland Spain or the Balearic Islands, through permanent establishments, by entities domiciled in the Canary Islands.