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Practical Income Manual 2022.

c) Investments where the amounts destined for the RIC must be materialized

Regulations: Art. 27.4 Law 19/1994, of July 6, modifying the Economic and Fiscal Regime of the Canary Islands

The amounts allocated to the investment reserve in the Canary Islands must materialize in one of the following investments:

  • Article 27.4.A: Initial investments consisting, among others, of the acquisition of new assets of tangible or intangible fixed assets as a result of:

    - The creation of an establishment.

    - The expansion of an establishment.

    - The diversification of the activity of an establishment for the production of new products.

    - The substantial transformation in the production process of an establishment.

    In no case may the reserve for investments in the Canary Islands be materialized in the acquisition of properties intended for housing for tourist purposes.

    Investments in land, built or not, are also considered initial, as long as they meet the requirements established in the aforementioned legal precept.

    In the case of taxpayers who meet the conditions of article 101 of the LIS to be considered small entities, in the tax period in which the benefit from which it is provided is obtained the reserve, the investment may consist of the acquisition of used elements of fixed assets, provided that the assets acquired have not previously benefited from the reserve regime for investments in the Canary Islands. In the case of land, the conditions provided for in this must be met in all cases. letter A of article 27.4 of Law 19/1994.

    Regarding LIS see Law 27/2014, of November 27, on Corporate Tax.

  • Article 27.4.B: Creation of jobs directly related to the investments provided for in letter A), which occurs within a period of six months from the date of entry into operation of said investment and meet certain requirements for increasing staff.

  • Article 27.4.B bis: Creation of jobs carried out in the tax period that cannot be considered as an initial investment because it does not meet any of the requirements established in letter B of article 27, with a limit of 50 percent of the contributions to the Reserve made by the taxpayer in the tax period.

  • Article 27.4.C: Acquisition of assets of tangible or intangible fixed assets that cannot be considered an initial investment because they do not meet any of the conditions established in letter A) above, as well as investment in assets that contribute to the improvement and protection of the environment in the Canary Islands, as well as those research and development expenses that are determined by regulation.

    In no case may the reserve for investments in the Canary Islands be materialized in the rehabilitation or renovation of properties intended for housing for tourist purposes.

  • Article 27.4.D: Subscription to the following titles:

    1. Shares or participations in the capital issued by companies as a result of their constitution or capital increase that carry out their activity in the archipelago, provided that the requirements established in the aforementioned legal precept are met.

    2. Shares or participations in the capital issued by entities of the Canary Islands Special Zone as a result of their constitution or capital increase, provided that the legally established requirements and conditions are met.

    3. Any financial instrument issued by financial entities provided that the funds raised for the purpose of materializing the Reserve are intended for financing private projects in the Canary Islands, whose investments are suitable in accordance with the provisions of this article, provided that the issues are supervised by the Government of the Canary Islands, and have a binding report from the State Tax Administration Agency.

    4. Public debt securities of the Autonomous Community of the Canary Islands, of the Canary Islands Local Corporations or of their public companies or autonomous bodies, provided that it is intended to finance investments in infrastructure and equipment or improvement and protection of the environment in the territory. Canary Islands, with a limit of 50 percent of the provisions made in each year.

    5. Securities issued by public bodies that proceed to the construction or exploitation of infrastructure or equipment of public interest for the Public Administrations in the Canary Islands, when the financing obtained with said issue is exclusively allocated to such construction or exploitation, with a limit of 50 per 100 of the provisions made in each year.

    6. Securities issued by entities that proceed with the construction or exploitation of infrastructure or equipment of public interest for the Public Administrations in the Canary Islands, once the corresponding administrative concession or inhabitant administrative title has been obtained, when the financing obtained with said issue is used exclusively to such construction or exploitation, with a limit of 50 percent of the allocations made in each year and in the terms provided for by regulation. The issuance of the corresponding securities will be subject to prior administrative authorization by the competent Administration for the granting of the corresponding inhabitant administrative title.

Note: Please note that sections 2, 4.A) and C), 5, 8 and 12 of article 27 of Law 19/1994, of July 6, were modified, for tax periods that begin on or after the 7th. of November 2018, by article one. Thirty-four of Law 8/2018, of November 5, which modifies Law 19/1994, of July 6, modifying the Economic and Fiscal Regime of the Canary Islands ( BOE of November 11).