Application in the Canary Islands of the deductions of articles 35 and 36 LIS
Regulations: Art. 94 Law 20/1991, of June 7, 1991, modifying the fiscal aspects of the Fiscal Economic Regime
The application of the deductions of articles 35 and 36 of the LIS with increased percentages to business investments made in the Canary Islands is based on the provisions of article 94 of Law 20/1991, of June 7. Article 94 of Law 20/1991 establishes the application of the general deduction regime of Article 26 of Law 61/1978, of December 27, with increased deduction percentages, provided that the investment is made and remains in the Canary Islands.
However, in the event that this general deduction regime of article 26 of Law 61/1978 is abolished, it was ordered by the transitional provision of Law 19/1994, of July , amending the Economic and Fiscal Regime of the Canary Islands, that its future application in the Canary Islands be maintained, as long as an equivalent substitute system is not established, in accordance with the regulations in force at the time of the abolition.
As a consequence of the above, the increased deduction percentages of article 94 of Law 20/1991 only apply to the new deduction system established in Chapter IV of Title VI of the LIS, where it is equivalent to the deductions of article 26 of Law 61/1978. That is, in the deductions of articles 35 and 36 of the LIS .
Note: Please note that, with effect from 1 January 2021, the possibility is established for taxpayers, businessmen or professionals who finance Spanish film productions and audiovisual series and those of certain live shows, to apply the deductions of sections 1 and 3 of article 36 of the LIS and, likewise, these deductions are included among those that generate the right to apply the joint limit of 50% (limit that for the Canary Islands is 90% in general, and 100% for the islands of La Palma, La Gomera and El Hierro).
a. Deduction percentages
In accordance with article 94.1.a) of Law 20/1991, of June 7, 1991, modifying the fiscal aspects of the Economic Fiscal Regime of the Canary Islands (BOE of June 8), the rates applicable to investments made will be 80% higher than those of the general regime, with a minimum differential of 20 percentage points.
However, there is an exception since in accordance with the provisions of the Thirteenth Additional Provision of Law 19/1994, of July 6, amending the Economic and Tax Regime of the Canary Islands, added, with effect from January 1, 2015, by Royal Decree-Law 15/2014, of December 19, amending the Economic and Tax Regime of the Canary Islands (BOE of December 20), it must be taken into account that the percentage of the deduction for technological innovation activities that are carried out in the Canary Islands and meet the criteria established in section 2 of article 35 of the LIS , will be 45 percent , without the provisions of article 94.1.a) of Law 20/1991, of June 7, modification of the fiscal aspects of the Economic Fiscal Regime of the Canary Islands.
Therefore, the applicable percentages and the deduction base in each of the deductions in articles 35 and 36 of the LIS are:
| Types of investment | Percentage | Deduction base | |
|---|---|---|---|
| Deduction for R&D activities (art. 35.1 LIS) | 45 percent | R&D expenditure for the period, up to the average of the previous 2 years | |
| 75.6 per 100 | R&D expenses for the period, over the average of the previous 2 years | ||
| 37 per 100 (additional) | Staff costs for qualified R&D researchers | ||
| 28 per 100 | Investments allocated to R&D (except buildings and land). | ||
| Deduction for technological innovation activities (art. 35.2 LIS) | 45 percent | Period expenses in technological innovation. | |
| Deduction for investments in Spanish film productions (art. 36.1 LIS) | 54 percent | Up to €1 million | Total cost of production together with costs of obtaining copies, advertising and promotion costs borne by the producer up to the limit of 40% of the cost of production. Take into account the maximum amount established DA14 Law 19/1994: €18 million |
| 45 percent | On the excess of 1 million € | ||
| Deduction for foreign film productions in Spain (art. 36.2 LIS) | 54 percent | Up to €1 million |
Expenses incurred in Spain directly related to production, provided they are at least €1 million. Take into account the provisions of DA14 Law 19/1994:
|
| 45 percent | On the excess of 1 million € | ||
| Deduction for production of certain live shows (art. 36.3 LIS) | 40 percent | Direct costs Maximum amount of €900,000 in the case of production and exhibition of live performances of performing arts and music |
|
b. Requirements and conditions for the application of deductions
Regarding the requirements and conditions determining the application of these deductions of the LIS (articles 35, 36 of the LIS ) their comment is contained in this Chapter in the section relating to the " General regime of deductions for incentives and stimuli to business investment of the Corporate Tax Law".
c. Specific limits on deductions for investments in film productions, audiovisual series and live performances of performing arts and music carried out in the Canary Islands
Without prejudice to the foregoing, with respect to article 36 of the LIS it must be taken into account that the Fourteenth Additional Provision of Law 19/1994, of July 6, amending the Economic and Fiscal Regime of the Canary Islands, establishes the following specific limits for deductions for investments in cinematographic productions, audiovisual series and live shows of performing and musical arts carried out in the Canary Islands:
- Maximum amounts:
-
The amount of the deduction for investments in Spanish productions of feature films and short films and audiovisual series of fiction, animation or documentary in article 36.1 of the LIS may not exceed 18 million euros when it comes to productions made in the Canary Islands.
-
The amount of the deduction for expenses incurred in Spanish territory for foreign productions of feature films or audiovisual works of article 36.2 of the LIS may not exceed 18 million euros when it concerns expenses incurred in the Canary Islands.
-
The maximum amount in the case of production and exhibition of live shows of performing and musical arts (article 36.3 LIS) may not exceed 900,000 euros per production.
Remember: Since 1 January 2021, the absolute limit of the deductions of sections 1 and 2 of article 36 LIS cannot be higher than the result of increasing the maximum amount at state level of this deduction by 80%. Therefore, the limit of this deduction in the Canary Islands is 18,000,000 euros.
- Minimum amounts:
A amount of 200,000 euros is established when concerns expenses incurred in the Canary Islands or animation in a foreign production (article 36.2 LIS ).