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Practical manual for Income Tax 2023.

2. Deduction for income derived from the sale of tangible assets produced in the Canary Islands

Regulations: Art. 26 and Additional Provision eleven of Law 19/1994, of July 6, amending the Economic and Fiscal Regime of the Canary Islands

Amount of deduction

50 percent of the portion of the full quota reduced, where applicable, by the amount of the deduction for the reserve for investments in the Canary Islands , in the part that proportionally corresponds to the income derived from the sale of tangible assets produced in the Canary Islands by the beneficiaries of the deduction, without prejudice to the limits established in the Community legislation that may affect it .

In this regard, the Second Additional Provision of Royal Decree-Law 15/2014, of November 19, establishes that with effect from January 1, 2015, the application of this bonus, as well as that of the tax benefits that are considered regional operating aid (Book II and article 94 of Law 20/1991, Law of the Autonomous Community of the Canary Islands, 4/2014, of June 26, article 27 and Title V of Law 19/1994, and Twelfth Additional Provision of Law 43/1995, of December 27), and aid for the transport of goods included in the scope of Royal Decree 362/2009, of March 20 and the Order of July 31, 2009 of the Minister of Public Works and Transport of the Government of the Canary Islands, will be subject to the following conditions: subject to the limit of 30% of the beneficiary's annual turnover obtained in the Canary Islands.

For the purposes of calculating the income derived from the sale of tangible assets produced in the Canary Islands, it must be taken into account that they will include:

  1. The amounts of aid derived from the specific supply regime, established under article 3.1.a) of Regulation (EU) No. 228/2013 of the European Parliament and of the Council.

  2. The amounts of aid to producers derived from the Community Program to Support Agricultural Productions in the Canary Islands, established under article 3.1.b) of Regulation (EU) No. 228/2013 of the European Parliament and of the Council.

The Paying Agency of such funds shall certify to the competent tax authority the amount or amounts of aid received by the producer from the support measures provided for in the previous paragraph.

Requirements

To apply the deduction, the following requirements must be met:

  • That the tangible goods produced in the Canary Islands derive from the exercise of agricultural, livestock, industrial and fishing activities, provided that, in the latter case, the deep-sea fishing is landed in the Canary Islands ports and is handled or transformed in the archipelago.

  • That the taxpayers are domiciled in the Canary Islands. If taxpayers are domiciled in other territories, they must engage in the production of the aforementioned goods in the Canary Islands through a branch or permanent establishment.

  • That they determine their returns under a direct estimation system.

  • That the net returns eligible for bonuses are positive.

Note: Please note that the bonus regulated in article 26 of Law 19/1994 is not applicable to income derived from the sale of tangible goods produced in the Canary Islands, typical of shipbuilding, synthetic fibres, the automobile industry, steel industry and coal industry activities.