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Practical manual for Income Tax 2021.

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

Regulations: Art. 4.One.z) Law 13/1997, of December 23, regulating the autonomous section of the Personal Income Tax and other transferred taxes, of the Valencian Community.

1. In general

Amount and limit of the deduction

  • 30 percent of the amounts invested during the year in the subscription and payment of shares or corporate interests as a result of agreements to establish or increase the capital of public limited companies, limited liability companies and employee-owned companies or of voluntary or obligatory contributions made by partners to cooperative societies.

  • 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 for certain circumstances examined in section 2) are independent of each other when they apply to different investments.

Requirements and other conditions for the application of the deduction

  • must not be shares or interests in an entity through which the same activity is carried out was previously carried out through another ownership.

  • The entity in which the investment is to be made must meet the following requirements:

    1. It must have its registered office and tax domicile in the Valencian Community and maintain it for the three years following its incorporation or expansion .

    2. You must carry out an economic activity during the three years following the constitution or expansion .

      For this purpose, the main activity must not be the management of movable or immovable assets, in accordance with the provisions of article 4.8.° Two.a) of Law 19/1991, of June 6, on the wealth tax.

    3. It must have, at least, one person employed with a full-time employment contract , registered in the general Social Security regime during the three years following the constitution or expansion.

    4. In the event that the investment had been made by means of a capital increase or new contributions, the company must have been incorporated in the three years prior to the date of this increase , provided that, in addition, during the twenty-four months following the date of the start of the corporate tax period in which the investment had been made, its average workforce had increased by at least one person with respect to the average workforce existing in the previous twelve months and that this increase had been maintained for an additional period of twenty-four months.

      To calculate the company's total average workforce and its increase, the number of people employed will be taken into account, in accordance with the terms established by labour legislation, taking into account the contracted working hours in relation to the full working day.

    The requirements contained in numbers 3 and 4 will not be required for labor societies or for worker cooperative societies.

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

  • The acquired shares must remain in the taxpayer's assets for minimum period of years following the incorporation or expansion.

  • Furthermore, the application of the deduction is conditional on the delivery of the monetary amounts derived from the act or legal transaction that gives the right to its application being made by credit or debit card, bank transfer, personal check or deposit into accounts in credit institutions .

    See Additional Provision sixteen of Law 13/1997, of December 23, regulating the autonomous section of the IRPF and other transferred taxes.

2. Additional increase in the deduction for certain circumstances

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

    1. They must prove to be innovative small and medium-sized companies for the purposes of Royal Decree 475/2014, of June 13 , on bonuses in Social Security contributions for research staff, or be owned by universities or research organizations.

    2. Have your tax domicile in some municipality at risk of depopulation .

      Municipalities at risk of depopulation

      1. To be considered a municipality at risk of depopulation, it must be a beneficiary of the Municipal Cooperation Fund for the fight against depopulation of the municipalities of the Valencian Community in the financial year in which the tax is levied or in the previous year by meeting at least five of the following requirements:

        a) Population density. Number of inhabitants: less than or equal to twenty inhabitants per square kilometer.

        b) Population growth. Population growth rate over the last twenty years: less than or equal to zero percent.

        c) Vegetative growth rate. Percentage that represents the natural balance (difference between births and deaths) on the population in the period between the last twenty years: less than or equal to -10%.

        d) Aging index. Percentage that the population over 64 years of age represents over the population under 16 years of age: greater than or equal to two hundred fifty percent.

        e) Dependency ratio. Quotient between the sum of the population under 16 and over 64 years of age and the population from 16 to 64 years of age, multiplied by 100: greater than or equal to sixty percent.

        f) Migration rate. Percentage representing the migratory balance in the period between the last ten years (difference between entries and exits of population for migratory reasons) with respect to 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 and appearing in the latest municipal register in force, and official statistics published by the National Institute of Statistics, the Valencian Institute of Statistics and official data from public administrations.

      2. However, municipalities that, even without meeting the requirements indicated, belong to functional areas with a population density equal to or less than 12.5 inhabitants per square kilometre will also have this status. The functional areas will be determined in accordance with the official data on territorial demarcations registered in the Registry of Local Entities of the Valencian Community, created by Decree 15/2011, of February 18, of the Consell.

      See in this regard the Resolutions of June 11, 2020 (DOCV 17-June-2020) and August 5 (DOCV 09-August-2021), of the Generalitat, on the allocation of the specific line of the Municipal Cooperation Fund for the fight against depopulation of the municipalities of the Valencian Community corresponding to each beneficiary entity, for the budgetary years 2020 and 2021, 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 apply to different investments.

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

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

It is up to the taxpayer to determine the order in which amounts pending deduction from previous years are to be applied.

In the event that there are amounts entitled to deduction that have been generated in the fiscal year and amounts pending deduction from previous fiscal years, the amounts from previous fiscal years will have priority in their application. 

Note: Taxpayers entitled to the deduction must record the amount generated in 2021, the amount applied in the fiscal year and the amount pending application that may be deducted in the following three tax periods. To determine the total amount of the general deduction in 2021, you must complete the section "Additional information on the regional deduction for investment in the acquisition of shares and equity interests in new or recently created entities" in Annex B.8 of the declaration in which, in addition to the amount of the investment entitled to deduction, you must enter the NIF of the newly or recently created entity and, if applicable, that of the second entity, indicating the total amount of the deduction for investments in newly or recently created companies in the corresponding box.