B. Deduction for investments in West African territories and for advertising and publicity expenses

Regulations: Article 27 bis Law 19/1994, of July 6, amending the Economic and Fiscal Regime of the Canary Islands

Includes two deductions:

1. Deduction for investments in West African territories

It is applicable to taxpayers who carry out economic activities in the Canary Islands when they make investments intended for the establishment of subsidiaries or permanent establishments in Morocco, Mauritania, Senegal, Gambia, Guinea Bissau and Cape Verde.

a) Deduction percentages

15 percent of investments in the event that the net amount of turnover in the immediately preceding tax period is equal to or less than 10 million euros and with an average workforce in said period of less than 50 people.

If the immediately preceding tax period had a duration of less than one year, or the activity had been carried out for a period of time that was also shorter, the net amount of the turnover will be increased to one year.

b) Requirements for the application of the deduction

Subsidiaries or permanent establishments established in Morocco, Mauritania, Senegal, Gambia, Guinea Bissau and Cape Verde must carry out economic activities in these territories within 1 year from the time of investment.
The entity that makes the investment alone or jointly with other entities with tax domicile in the Canary Islands must hold a percentage of participation in the capital or in the equity of the subsidiary of at least 50 percent.
The investment must be maintained for a period of at least 3 years.
The deduction will be applied in the tax period in which the economic activity begins and will be conditional on an increase in the average number of employees in the Canary Islands of the taxpayer in that tax period compared to the average number of employees existing in the previous tax period and on maintaining said increase for a period of 3 years.

2. Deduction for multi-year advertising and publicity expenses

It is applicable to taxpayers who carry out economic activities in the Canary Islands for amounts paid for advertising and publicity expenses with a multi-year projection.

a) Deduction percentages

15% of the amount paid for these advertising and publicity expenses in the event that the net amount of the turnover in the immediately preceding tax period is equal to or less than 10 million euros and with an average workforce in said period of less than 50 people.
10% of the amount paid for these advertising and publicity expenses when the net turnover does not exceed 50 million euros and the average workforce is less than 250 people.

b) Requirements for the application of the deduction

These must be expenses for advertising and publicity with a multi-year projection for the launch of products, the opening and prospecting of markets abroad and attendance at fairs, exhibitions and similar events, including in this case those held in Spain with an international character.

3. Joint limit on deduction for investments in West African territories and for advertising and publicity expenses: 25 percent or 50 percent

The deduction for investments in West African territories and for advertising and publicity expenses in article 27 bis of Law 19/1994 is subject to the limits established in article 39.1 of the LIS of 25 or 50 percent of the quota.

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