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Practical Income Manual 2020.

By investment in the acquisition of shares or social participations in new or recently created entities and their financing

Regulations: Art. 5. Ten Text Recast of the legal provisions of the Autonomous Community of Galicia regarding taxes transferred by the State, approved by Legislative Decree 1/2011, of July 28.

1. In general

Amount and maximum limit of the deduction

Taxpayers may deduct the following amounts from the full regional quota, and with a joint limit of 20,000 euros :

  • 30 percent of the amounts invested during the year in the acquisition of share capital as a result of agreements to establish companies or increase capital in public limited companies, limited companies, labor companies and cooperatives .
  • With respect to the same entities, 30 percent of the amounts lent may be deducted during the year, as well as the amounts personally guaranteed by the taxpayer, provided that the loan is granted or The guarantee is constituted in the year in which the company is incorporated or its capital is increased.

Requirements and other conditions for the application of the deduction

  • The participation of the taxpayer, computed together with those of the spouse or persons united by reason of kinship, in a direct or collateral line, by consanguinity or affinity up to the third degree included, It cannot be more than 40% nor less than 1% of the share capital of the company that is the object of the investment or of its voting rights at any time and during the three years following the constitution or expansion.

    In the case of a loan or guarantee, the taxpayer's participation in the capital will not be necessary, but if it exists, it cannot be higher than 40 percent with the same previous time limits. The amount lent or guaranteed by the taxpayer must be greater than 1 percent of the company's net assets .

    The maximum limit of participation in the share capital will not apply in the case of labor companies or cooperatives composed of only two members, as long as this circumstance remains.

  • The entity in which the investment, loan or guarantee must be made must meet the following requirements:

    1. It must have its registered and tax domicile in Galicia and maintain it for the three years following the constitution or expansion.
    2. It must carry out an economic activity during the three years following the constitution or expansion. To this end, its main activity must not be the management of movable or real estate assets, in accordance with the provisions of article 4.8. Two.a) of Law 19/1991, of June 6, on Wealth Tax.
    3. It must have, at least, one employed person with a full-time employment contract , registered in the general Social Security regime and with habitual residence in Galicia. The contract will have a minimum duration of one year and must be formalized within two years following the constitution or expansion, except in the case of labor companies or cooperative societies.
    4. In the event that the investment was made through a capital increase or the loan or guarantee had been made in the exercise of an increase, the commercial company must have been incorporated in the previous three years on the date of this extension, and that in addition, during the twenty-four months following the date of the beginning of the Corporate Tax tax period in which the extension was carried out, its average staff with habitual residence in Galicia will increase , to at least by one person , with with respect to the average workforce with habitual residence in Galicia of the previous twelve months , maintaining said increase during an additional period of another twelve months , except in the case of labor companies or cooperative societies.

      To calculate the total average staff of the organisation and the growth thereof, the number of persons employed will be decided in accordance with the provisions of labour legislation, taking into account the contracted hours in relation to a full day.

  • The taxpayer can be part of the board of directors of the company in which the investment materialized, but in no case can he carry out executive or management functions for a period of ten years . Nor can you maintain an employment relationship with the entity that is the object of the investment during that same period, except in the case of labor companies or cooperative companies .
  • The operations in which the deduction is applicable must be formalized in a public deed , which must specify the identity of the taxpayers who intend to apply this deduction and the amount of the respective operation.
  • The shares acquired must be maintained in the taxpayer's assets for a minimum period of three years, following the constitution or expansion.

    In the case of loans, these must refer to financing operations with a term of more than five years, not being able to amortize an amount greater than 20 percent per year of the principal amount lent. In the case of guarantees, these will extend to the entire duration of the guaranteed operation, which may not be less than five years.

2. Additional increase in the deduction for certain circumstances

  • The deduction may be increased by an additional 15 percent when, in addition to meeting the requirements established for the deduction in general, one of the following circumstances occurs :

    1. The acquisition of shares or social participations as a result of agreements to establish or increase capital, in the case of public limited companies, limited companies, labor companies and cooperatives that prove to be small and medium-sized innovative companies, in accordance with the provisions of Order ECC /1087/2015, of June 5, which regulates obtaining the small and medium-sized innovative company seal and creates and regulates the operation of the Registry of Innovative Small and Medium Enterprises.
    2. The acquisition of shares or social participations as a consequence of agreements to establish or increase capital, in the case of public limited companies, limited companies, labor companies and cooperatives that prove to be companies promoting a business project that has accessed the obtaining qualification as a technology-based employment initiative , in accordance with the provisions of Decree 56/2007, of March 15, which establishes a support program for technology-based employment initiatives (IEBT), by registering the initiative in the Administrative Registry of Technology-Based Business Initiatives.
    3. The acquisition of shares or social participations as a result of agreements to establish or increase capital, in the case of public limited companies, limited companies, labor companies and cooperatives in which universities or research organizations participate.
  • The maximum limit of the deduction in these cases is 35,000 euros.

Attention: The percentage of deduction applicable for investments in which these circumstances occur will be 45 percent (30 percent + 15 percent) and the limit of 35,000 euros applicable for calculating the deduction, in these cases, is independent of the general limit of 20,000 euros.

Incompatibility

The deduction contained in this section will be incompatible, for the same investments, with the deductions for investment in the acquisition of shares or social participations in new or recently created entities of article 5. Nine of Legislative Decree 1/2011, for investment in shares of entities listed in the segment of expanding companies of the alternative stock market to which we refer below and for investment in agricultural companies and agricultural cooperative societies or community exploitation of land provided for in article 5.Fifteen of Legislative Decree 1/2011.

Note: Taxpayers entitled to the deduction must complete the section "Additional information to the autonomous deduction of Galicia for investment in the acquisition of shares or social participations in new or recently created entities and their financing" of Annex B.7) of the declaration in which, in addition to the amount of the investment with the right to deduction, the NIF of the newly or recently created entity must be stated and, if it exists, that of the second entity, indicating the total amount of the deduction for investments in new or recently created companies and their financing in the corresponding box.