C. Deduction for Investments in the acquisition of fixed assets
Regulations: Art. 94 Law 20/1991, of June 7, modifying the fiscal aspects of the Fiscal Economic Regime of the Canary Islands
The deduction for investments in elements of tangible fixed assets is regulated in the twelfth Additional Provision of Law 43/1995, of December 27, on Corporate Tax, with the increased percentages and other specialties established in article 94 of Law 20 /1991 for the Canary Islands.
The reason for maintaining its application is that said deduction, which was included in the general deduction regime of article 26 of Law 61/1978 of December 27, does not currently appear among the deductions for investments in Chapter IV of Title VI of the LIS, therefore, in accordance with the fourth transitional provision of Law 19/1994 to which reference was made previously, as there is no equivalent deduction in the current LIS, said deduction continues to be applied in accordance with the regulations in force in the moment of its deletion. In this case, in accordance with the twelfth Additional Provision of Law 43/1995, of December 27, on Corporate Tax, which repealed and replaced Law 61/1978, of December 27, on Corporate Tax.
a. New fixed assets
Taxpayers can deduct from the full quota 25 per 100 of the amount of investments in new elements of tangible fixed assets, excluding land, used for the development of economic activity that are made available of the taxpayer within said tax period.
In accordance with article 94.1.a) Law 20/1991, of June 7, modifying the fiscal aspects of the Economic Fiscal Regime of the Canary Islands (BOE of June 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.
Investments made under a financial lease regime may benefit from this deduction, with the exception of buildings.
b. Fixed assets used
Likewise, taxpayers can deduct from the full quota 25 per 100 of the amount of the investments for the acquisition of the used fixed asset element, which would not have previously enjoyed this deduction for investments in elements of property, plant and equipment.
The fixed assets used that give the right to deduction must belong to one of the following categories (Royal Decree 241/1992):
Machinery, installations and tools.
Information processing equipment.
Internal and external transport elements, excluding vehicles that may be used by people directly or indirectly linked to the company
To be entitled to this deduction, the acquisition of the used fixed asset element must represent an obvious technological improvement for the company, and this circumstance must be proven, in the event of verification or investigation of the taxpayer's tax situation, by justifying that the element object of the deduction will produce or has produced any of the following effects:
Reduction in the unit production cost of the good or service.
Improvement of the quality of the good or service.
c. Deduction base
The basis of the deduction will be the acquisition price or production cost.
d. Investment maintenance
It will be a requirement to enjoy the deduction for investments that the elements remain in operation in the company of the same taxpayer for five years, unless their useful life according to the amortization method applied is shorter.
The taxpayer must keep at the disposal of the Tax Administration certification issued by the transferor stating that the item object of the transfer has not previously enjoyed the deduction for investments or the Investment Provident Fund regime.
f. Deductions not applied due to insufficient quota
As a consequence of the Canary Islands continuing to apply the deduction for investments in elements of tangible fixed assets, it must be taken into account that, as in the rest of the types of deductions for investment, the amounts not deducted for this concept (including the balances of the deductions pending application as of January 1, 2015) may be applied, respecting the limits that apply to them, in the settlements of the tax periods that conclude in the immediate and subsequent 15 years.
The taxpayer may deduct the amount of the deduction for investments in new fixed assets in the Canary Islands that come from both previous tax periods that are pending application and from the tax period itself, with a double limit:
An individual limit of 50 percent of the aforementioned quota.
For these purposes, indicate that the limit for this deduction, according to section 7 of the twelfth Additional Provision of Law 43/1995, was 15 percent of the full quota plus the minimum differential of 35 percentage points established in article 94 of Law 20/1991.
This individual limit of 50 percent applies both to the deduction generated in the tax period itself and to those from previous tax periods. And, in the event that there is a pending deduction amount from previous periods, this may be applied taking into account, in addition, the joint limit of 70 percent referred to below.
A joint limit of 70 percent , which is determined by application of the provisions of section 4 of the eleventh transitional provision of Law 43/1995.
The aforementioned section 4 of the eleventh transitional provision of Law 43/1995 sets a joint limit of 35 percent plus the minimum differential of 35 percentage points established in article 94 of Law 20/1991.
The limit of the deduction for investments in the Canary Islands in new fixed assets is applied, in accordance with the Resolution of the TEAC of April 9, 2015, Claim number 00/05445 /2014 , extraordinary appeal recourse for unification of criteria, on the entire full quota and not only on the part of it that corresponds to income from the economic activities carried out in the Canary Islands.
Note: In the case of the islands of La Palma, La Gomera and El Hierro, the percentages of 50 percent (individual) and 70 percent (group) rise to 60 percent (individual) and 80 per 100 (set) , respectively.