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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 Corporate Tax, with tax domicile in the Canary Islands, may benefit from the first financial year closed after December 31, 1991, and in relation to the investments made and that remain in the Archipelago to the deduction regime provided for in article 26 of Law 61/1978, of December 27, on Corporate 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 its maximum limit the percentage indicated below of the liquid quota resulting from reducing the full quota in the amount of the deductions for double taxation and, where appropriate, the bonuses provided for in article 25. of Law 61/1978, of December 27, on Corporate Tax. Such percentage will always be 80 percent higher than that set for each modification of the investment deduction in the general regime with a minimum differential of 35 percentage points. Therefore, the limit of the deduction is established at 60 percent of the net amount of the tax period, which rises to 90 percent when the amount of the deduction for research and development activities, which corresponds to expenses and investments made in the tax period itself, exceeds 10 percent of said net amount.

Note:

With effects for tax periods that begin on or after November 7, 2018, Law 8/2018, of November 5, modifies the fourth Additional Provision of Law 19/1994, of July 6, in relation to the deduction for investments in the Canary Islands, to raise the joint limit on the quota on the islands of La Palma, La Gomera and El Hierro, increasing the minimum limit from 80 percent to 100 percent and moving the minimum differential from 35 points to 45 percentage points , provided that the community regulations on state aid allow it and they are investments contemplated in Law 2/2016, of September 27 and other laws on measures for the organization of the economic activity of these islands. Therefore, the limit of the deduction is established at 70 percent of the net amount of the tax period, which rises to 100 percent when the amount of the deduction for research and development activities, which corresponds to expenses and investments made in the tax period itself, exceeds 10 percent of said net amount.

The investment deduction regime 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 carried out and remain in the Archipelago

In this case, the maximum deduction limit on the liquid quota referred to in article 94.1.b) of Law 20/1991 will be applied regardless of what corresponds to the investments under the general regime.

This criterion will also apply to investments made in peninsular territory or the Balearic Islands, through permanent establishments, by Entities domiciled in the Canary Islands.