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Practical guide to 2020 Income Tax.

F) Information to be provided in the Personal Income Tax return

The maximum term for making the investment reserve in the Canary Islands is three years, pursuant to the provisions of article 27,4 of Act 19/1994, of 6 July, amending the Canary Islands Economic and Tax Regime, which is drafted by the Royal Decree-Law 15/2014, of 19 December, amending the Canary Islands Economic and Tax Regime.

This three-year period must be counted from the date of accrual of the tax corresponding to the financial year in which the provision (accounting) of the reserve occurs and this provision in the case of individuals may be:

  • At the end of the accounting year, on 31 December each year.
  • In the year following the year of obtaining the profit.

The above determines that individuals will have an effective period to materialize the IRC for three or four years, depending on when they have completed the accounting entry of the reserve allocation (at the end of the financial year or the following financial year). This duality (which does not happen in the case of Companies) is the result of the design of the Personal Income Tax model.

The information on provisions and materialisations made in 2020 of the Canary Islands investment reserve for the years 2016 to 2020 and early investments of future provisions will be provided in accordance with the breakdown in the corresponding section of Annex A.2) of the tax return as follows:

Provisions and materialisations carried out in 2020

  • Boxes [0733], [0735], [0738], [0742] and [0746] .

    The amount of the allowances corresponding to earnings obtained in the Canary Islands in the 2016 to 2020 financial years that have been allocated to the IRC will be indicated.

  • Boxes [0734] [0789], [0792], [0794] and [0802]

    The year of the allocation (2016 to 2020) will be indicated that, as we have mentioned earlier, it may be at the close of the financial year in which the net operating income has been obtained or in the following financial year.

  • Boxes [0777], [0736], [0739], [0743] and [0747].

    The amount of the materialisations carried out against the endowment previously declared in the investments provided for in points A, B and D 1 of article 27,4 of Act 19/1994 will be indicated.

  • Boxes [0778], [0737], [0740], [0744] and [0748].

    The amount of the materialisations carried out against the endowment previously declared in the investments provided for in points C and D 2 to 6 of article 27,4 of Law 19/1994 will be indicated.

  • Boxes [0829], [0790], [0741], [0745] and [0749].

    The amount of each of the previously declared provisions that are pending materialisation at 31 December 2020 will be indicated.

    Covid-19: It should be taken into account that Royal Decree-Law 39/2020, of 29 December, on financial measures to support society and the compliance with the execution of sentences, introduces a new transitional provision eight in Act 19/1994, of 6 July, amending the Canary Islands Economic and Tax Regime, to extend the period for making the booking for investments in the Canary Islands in one year, with benefits obtained in 2016 and the provision of this reserve for the early investments made in 2017 and considered to be the realisation thereof, by the serious effects of the pandemic on investments and economic results in 2020. For this reason, the box [0829] has been added to the model.

    Notwithstanding the above, it should be taken into account that the box [0790] may also be filled in when the investment reserve obtained from the 2016 profits was allocated in 2017.

Early investments of future provisions to the Canary Islands Investment Reserve, made in 2020.

The information will be carried out in accordance with the following breakdown:

  • Box [0750].

    The amount of investments made in 2020 as the early realisation of future provisions in the provisions of article 27,4 will be indicated. A, B bis and D 1, Act 19/1994.

  • Box [0751].

    The amount of investments made in 2020 as the early realisation of future provisions in the provisions of article 27,4 will be indicated. C and D 2 to 6, Act 19/1994.