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Practical guide to 2021 Income Tax.

For investment in the acquisition of shares or social holdings in new or recently created entities

Regulations: Art. 4.Uno.z) Act 13/1997, of 23 December, regulating the autonomous range of Personal Income Tax and other taxes transferred, from the Valencian Community.

1. In general

Amount and limit of the deduction

  • 30% Of the amounts invested during the year in the subscription and disbursement of shares or social holdings as a result of 100 agreements to set up or increase the capital of public limited companies, limited liability companies and labour companies or voluntary or compulsory contributions made by the members to the cooperative companies.

  • Limit. The amount of the deduction may not exceed 6,000 euros, both in individual taxation and in joint taxation.

    Note: The limits of 6,000 euros (in general) and 9,000 euros (for the additional increase in the deduction due to certain circumstances described in section 2) are independent, among others, when they fall on different investments.

Requirements and other conditions for applying the deduction

  • It must not be shares or holdings in an entity through which the same activity that had been carried out previously by another holder is carried out.

  • The entity in which the investment must materialize must meet the following requirements:

    1. You must have the registered office and tax address in the Valencian Community and keep it for the three years following the constitution or extension.

    2. You must carry out an economic activity for the three years following the constitution or extension.

      To this end, the main activity of the company is not to manage movable or immovable property, in accordance with the provisions of article 4,8. section 19 (a) of Act 1991/6 of June on capital tax.

    3. You must have at least one person employed with a full-time employment contract, registered in the General Social Security regime for the three years following the constitution or extension.

    4. If the investment has been made through a capital increase or new contributions, the company must have been incorporated in the three years prior to the date of this extension , provided that, in addition, during the twenty-four months following the start date of the tax period for companies in which the investment was made, its average workforce is increased, at least, in a person with respect to the average workforce in the previous twelve months and that this increase would remain for an additional period of twenty-four other months.

      To calculate the company's total average workforce and increase, the employees will be taken into account, in the terms in which they have the labour law, taking into account the working day contracted in relation to the full working day.

    The requirements contained in numbers 3 and 4 will not be enforceable for labour companies or associated working cooperatives.

  • The transactions in which the deduction is applicable must be formalized in a public deed, in which the identity of the investors and the amount of the respective investment must be specified.

  • The shares acquired must be held in the taxpayer's assets for a minimum period of three years following the constitution or extension.

  • In addition, the application of the deduction is conditional on the delivery of the monetary amounts derived from the legal act or business that you can apply using a credit or debit card, bank transfer, registered cheque or deposit in credit institutions.

    See Additional Provision 13 of Act 1997/23, of December, which regulates the autonomous range of Personal Income Tax and other taxes transferred.

2. Additional increase in the deduction due to certain circumstances

  • The deduction may be increased by an additional 15%, when, in addition to complying with the above requirements, the fund receiving entities meet any of the following conditions: 100

    1. Prove to be small and medium-sized innovative companies for the purposes of Royal Decree 475/2014 of 13 June on discounts on contributions to the Social Security of research staff, or are owned by universities or research bodies.

    2. Have their tax address in a municipality at risk of depopulation.

      Municipalities at risk of depopulation

      1. To be considered a municipality as at risk of depopulation, it must be a beneficiary of the Municipal Cooperation Fund to combat depopulation of the municipalities of the Valencian Community in the budget year in which the tax is accrued or in the previous year due to at least five of the following requirements:

        A) Population density. Number of inhabitants: Less than or equal to the twenty inhabitants per square kilometer.

        B) Population growth. Population growth rate in the period from the last twenty years: Less than or equal to zero per cent.

        C) Plant growth rate. Percentage of the vegetation balance (difference between births and deaths) over the population in the period from the last twenty years: Less than or equal to-10%.

        D) Ageing rate. Percentage of the population over 64 years of age of the population under 16 years: % Or more.

        E) Dependency index. The ratio of the population of children under 16 years of age and over 64 to the population aged 16 to 64 years, multiplied by 100: % Or more.

        F) Migration rate. Percentage of the migratory balance in the period from the last ten years (difference between the number of people entering and leaving for migratory reasons) over the total population of the last year: Less than or equal to zero.

        These data will be determined in accordance with the population figures approved by the Government that appear in the last municipal census in force, and of official statistics published by the National Statistics Institute, by the Valencian Institute of Statistics and official data of the public administrations.

      2. However, municipalities that, even if they do not meet the requirements indicated, belong to functional areas with a population density of at least 12.5 inhabitants per square kilometer. The functional areas will be determined in accordance with the official data on territorial demarcations registered in the Register of Local Entities of the Valencian Community, created by Decree 15/2011 of 18 February, of the Council.

      See in this regard the Resolutions of 11 June 2020 (DOV 17-junio-2020) and of 5 August (DOV 09-agosto-2021), of the Generalitat, on the allocation of the specific line of the Municipal Cooperation Fund to combat the depopulation of the municipalities of the Valencian Community corresponding to each beneficiary entity, for the 2020 and 2021 financial years, respectively.

  • The maximum limit of the deduction in these cases is 9,000 euros, both in individual taxation and in joint taxation.

    Note: The limits of 6,000 euros (in general) and 9,000 euros (for the additional increase in the deduction for certain circumstances) are independent of each other when they fall on different investments.

3. Amount of the deduction not applied in the financial year due to insufficient payments

In the event that the taxpayer does not have sufficient full regional payment to apply all or part of this deduction in the period in that the right to its application is generated, the amount not deducted may be applied in the following three tax periods until the total amount is exhausted, if applicable.

The taxpayer must determine the order for the amounts to be deducted from previous financial years.

In the event that there are amounts with the right to deduct that have been generated in the financial year and amounts pending deduction from previous years, the amounts from previous years will be given priority in their application. 

Note: Taxpayers entitled to the deduction must enter the amount generated in 2021, the amount applied in the financial year and the amount pending application that can be deducted in the following three tax periods. To determine the total amount of the general deduction in 2021, the section "Further information to the autonomous community deduction for investment in the acquisition must be completed of shares and social holdings in new or recently created entities "in Annex B.8 of the tax return in which, in addition to the amount of the investment with the right to deduction, the Tax ID of the newly created entity must be entered and, if it exists, the the second bank, indicating the total amount of the deduction for investments in new or recently created companies in the corresponding box.