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Practical Income Manual 2023.

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

Attention: For the purposes of applying the deduction for investments in new fixed assets in the Canary Islands, the regulations that must be applied, in light of the provisions of the fourth transitional provision of Law 19/1994, is the deduction system for investments in the Canary Islands. contemplated in article 26 of Law 61/1978, of December 27, on Corporate Tax, and in its Regulations, approved by Royal Decree 2631/1982, of October 15, regulations in force at the time of its suppression, understanding that there is no equivalent replacement regime in the current LIS . Interpretative criterion established by the Supreme Court in the third legal basis of Sentence no. 605/2024, of April 10, relapsed in the contentious-administrative cassation appeal no. 1299/2022 (RED: STS 2022/2024).

In accordance with the above, the twelfth Additional Provision of Law 43/1995, of December 27, on Corporate Tax, cannot be considered as an equivalent substitute regime for the deduction for new fixed assets.

a. New fixed assets

Taxpayers can deduct 25 per 100 of the investments they actually make in new fixed assets from the full fee.

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 rates applicable on the investments made will be 80 percent higher than those of the general regime, with a minimum differential of 20 percentage points. Taking into account the above, and after the aforementioned Supreme Court Ruling 2022/2024, by which it considers article 26 of the aforementioned Law 61/1978 in its latest wording applicable to the deduction for investment in new fixed assets, given by the Article 74 of Law 41/1994, of December 30, on the General State Budget for 1995, the applicable deduction rate will be 5%. Therefore, the deduction percentage will be 25 percent.

See articles 214, 215 and 216 of Royal Decree 2631/1982, of October 15, for the consideration of an element as a new fixed asset for the purposes of the aforementioned deduction.

In no case will land be considered new fixed assets.

Taxpayers who dedicate themselves, through economic exploitation, to leasing or transferring fixed assets to third parties for their use may enjoy the investment deduction for new fixed assets, provided they meet the remaining requirements and there is no connection. directly or indirectly, with the lessees or assignees of said assets, nor are they financial leasing operations.

Investment in movable property under a financial lease:

Personal property acquired under a financial lease regime that has an amortization coefficient equal to or greater than deduction will be eligible for the deduction 10 per 100. In this case, the applicable deduction percentage, which in no case will be higher than that generally established, will be calculated in accordance with the provisions of article 26. Fifth of Law 61/1978.

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 that had not previously enjoyed this deduction for investments in elements of material assets.

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.

  • Elements of internal and external transport, 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. Calculation moment of the deduction

Investments in tangible fixed assets that give the right to the investment deduction will be deemed to have been made in the tax period in which they come into operation.

See section 3 of article 218 of Royal Decree 2631/1982 on the possibility of opting for a calculation criterion in the years in which payments are made in cases where the investment payment term is greater than 2 years or if The period elapsed between the firm order of the goods and their receipt is greater than 2 years.

d. Deduction base

The base of the deduction will include the entire agreed consideration, excluding interest, indirect state taxes and their surcharges, which will not be computed in it, regardless of their consideration for the purposes of the valuation of the assets.

Furthermore, it cannot be higher than the price that would have been agreed under normal market conditions between independent parties in the operations carried out in the cases contemplated in article 26.Nueve.Segunda of Law 61/1978.

e. 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 at least five years or during their useful life, if shorter, without being subject to transmission, lease or assignment to third parties for their use. use.

f. Justification

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.

g. 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 calculation of the period for the application of the aforementioned deduction may be deferred until the first year in which, within the limitation period, positive results are produced in the cases provided for in article 26.Sexta of Law 61/1978.

h. Limit

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 single limit of 70 per 100.

This limit is determined by application of the provisions of section Seven.First of article 26 of Law 61/1978, which 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 TEAC of April 9, 2015, Claim number 00/05445/2014, issued in extraordinary appeal for unification of criteria, on the entire full quota and not only on the part of it that corresponds to income from economic activities carried out in the Canary Islands.

Note: In the case of the islands of La Palma, La Gomera and El Hierro, the percentage of 70 percent rises to 80 percent.