Application in the Canary Islands of the deductions of articles 35 and 36 LIS
Regulations: Art. 94 Law 20/1991, of June 7, 1991, modifying the fiscal aspects of the Fiscal Economic Regime
The application to business investments made in the Canary Islands of the deductions of articles 35 and 36 of the LIS with increased percentages is based on the provisions of article 94 of Law 20/1991, of June 7. Said article 94 of Law 20/1991 establishes the application of the general deduction regime of article 26 of Law 61/1978, of December 27, with increased deduction percentages, provided that the investment is made and remains in the Canary Islands.
However, in the event that this general regime of deductions of article 26 of Law 61/1978 was suppressed, it was ordered by fourth transitional provision of Law 19/1994, of July 6 , to modify the Economic and Fiscal Regime of the Canary Islands to maintain its future application in the Canary Islands, as long as an equivalent replacement system is not established, in accordance with the regulations in force at the time of suppression.
As a consequence of the above, the increased deduction percentages of article 94 of Law 20/1991 only apply to the new system of deductions established in Chapter IV of Title VI of the LIS, where it is equivalent to the deductions of article 26. of Law 61/1978. That is, in the deductions of articles 35 and 36 of the LIS .
Note: Please note that, with effect from January 1, 2021, the possibility is established for taxpayers, businessmen or professionals who finance Spanish film productions and audiovisual series and those of certain live shows, to apply the deductions of the sections 1 and 3 of article 36 of the LIS and, likewise, these deductions are included among those that generate the right to apply the joint limit of 50 percent (a limit that for the Canary Islands is 90 percent in general, and 100 percent for the islands of La Palma, La Gomera and El Hierro).
a. Deduction percentages
In accordance with article 94.1.a) Law 20/1991, of June 7, 1991, modifying the fiscal aspects of the Economic Fiscal Regime of the Canary Islands (BOE of 8), the applicable rates on investments made will be higher by 80 per 100 to those of the general regime, with a minimum differential of 20 percentage points.
However, there is an exception since in accordance with the provisions of the thirteenth Additional Provision of Law 19/1994, of July 6, modifying the Economic and Fiscal Regime of the Canary Islands, added, with effect from January 1, 2015 , by Royal Decree-Law 15/2014, of December 19, modifying the Economic and Fiscal Regime of the Canary Islands (BOE of 20), it must be taken into account that the percentage of the deduction for technological innovation activities that are carried out in the Canary Islands and meet the criteria established in section 2 of article 35 of the LIS , will be 45 per 100 , without the provisions of article 94.1.a) of Law 20/1991, of June 7, modifying the fiscal aspects of the Economic Fiscal Regime of the Canary Islands, being applicable.
Therefore, the applicable percentages and the deduction base in each of the deductions of articles 35 and 36 of the LIS are:
|Investment modalities||Percentage||Basis of deduction|
|Deduction for R&D activities (art. 35.1 LIS)||45 percent||Expenses for the period on R&D, up to the average of the previous 2 years|
|75.6 per 100||Expenses for the period on R&D, over the excess compared to the average of the previous 2 years|
|37 percent (additional)||Personnel expenses of qualified R&D researchers|
|28 percent||Investments related to R&D (except buildings and land).|
|Deduction for technological innovation activities (art. 35.2 LIS)||45 percent||Expenses of the period in technological innovation.|
|Deduction for investments in Spanish film productions (art. 36.1 LIS)||54 percent||Up to €1 million||Total production cost together with expenses for obtaining copies, advertising and promotion expenses borne by the producer up to the limit of 40% of the production cost.
Take into account the maximum amount established DA14 Law 19/1994: €18 million
|45 percent||About the excess of €1 million|
|Deduction for foreign film productions in Spain (art. 36.2 LIS)||54 percent||Up to €1 million||
Expenses made in Spain directly related to production, as long as they are at least €1 million.
Take into account the provisions of DA14 Law 19/1994:
|45 percent||About the excess of €1 million|
|Deduction for production of certain live shows (art. 36.3 LIS)||40 percent||Direct costs
Maximum amount of €900,000 in the case of production and exhibition of live performing arts and musical shows
b. Requirements and conditions for the application of deductions
Regarding the requirements and conditions determining the application of these LIS deductions (articles 35, 36 of the LIS ), your comment is contained in this Chapter in the section relating to General regime of deductions for incentives and stimuli for business investment of the Corporate Tax Law.
c. Specific limits on deductions for investments in film productions, audiovisual series and live performing arts and musical shows performed in the Canary Islands
Without prejudice to the above, with respect to article 36 of the LIS it must be taken into account that the fourteenth Additional Provision of Law 19/1994, of July 6, modifying the Economic Regime and Fiscal of the Canary Islands, establishes the following specific limits for deductions for investments in film productions, audiovisual series and live performing arts and musical shows carried out in the Canary Islands:
- Maximum amounts:
The amount of the deduction for investments in Spanish productions of feature films and short films and audiovisual fiction, animation or documentary series of article 36.1 of the LIS may not exceed 18 million euros when it comes to productions made in the Canary Islands.
The amount of the deduction for expenses incurred in Spanish territory for foreign productions of feature films or audiovisual works of article 36.2 of the LIS may not exceed 18 million euros when deals with expenses incurred in the Canary Islands.
Maximum amount in the case of production and exhibition of live performances of performing and musical arts (article 36.3 LIS) may not exceed 900,000 euros per production.
New 2021: With effect from January 1, 2021, the absolute limit of deductions in sections 1 and 2 of article 36 LIS may not be higher than the result of increasing the maximum amount at state level of this deduction by 80 percent. Therefore, the limit of this deduction in the Canary Islands will be 18,000,000 euros.
- Minimum amounts:
A minimum amount of 200,000 euros is established in the case of expenses incurred in the Canary Islands or animation in a foreign production (article 36.2 LIS ).