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Practical Income Manual 2023.

c) Investments where the amounts destined for the RIB and the amount of the materialization must be materialized

Regulations: number 4 of section Four of the seventieth Additional Provision. Law 31/2022, of December 23, on General State Budgets for the year 2023

The amounts allocated to the investment reserve in the Balearic Islands must materialize in one of the following investments:

Letter a:

1. Asset elements of tangible or intangible fixed assets

Asset elements of tangible or intangible fixed assets will be understood as those elements referred to in the corresponding registration and valuation standards issued in development of the General Accounting Plan approved by Royal Decree 1514/2007, of November 16.

The assets may be new or used, provided that, in the case of the latter, said assets have not formed part, in their entirety, of the materialization of the reserve for investments in the Balearic Islands with respect to another taxpayer.

Precisions:

  1. In the case of investments for acquisition of land, built or not , this must be affected:

    • To the promotion of protected housing, when this qualification is applicable in accordance with the provisions of the regional regulations governing Decree 27/2006, of March 7, which regulates the actions of the Housing Plan of the Balearic Islands, and are intended for leasing by the development company.

    • To the development of industrial activities included in divisions 1 to 4 of the first section of the rates of the Tax on Economic Activities, approved by Royal Legislative Decree 1175/1990, of September 28, which approves the rates and instructions of the Tax on Economic Activities.

    • To social-health activities, residential centers for the elderly, geriatric homes and neurological and physical rehabilitation centers.

    • To commercial areas that are the subject of a rehabilitation process.

    • To the tourist activities regulated in article 3.b) of Law 8/2012, of July 19, on Tourism of the Balearic Islands, whose acquisition has as its object the rehabilitation of a tourist establishment, one of those defined in article 3. h) of the aforementioned law 8/2012. 

    For the sole purpose of understanding that the value corresponding to the land is included in the amount of the materialization of the reservation, rehabilitation works will be considered actions aimed at the renovation, expansion or improvement of tourist establishments, provided that they meet the necessary conditions to be incorporated. to tangible assets as the greatest value of the property.

  2. In the case of acquisition of intangible fixed assets , the reserve may not materialize in trademarks or non-patented knowledge, under the terms determined by regulation.

  3. In the case of the acquisition of elements of passenger transport by sea must be dedicated exclusively to public services in the scope of functions of general interest that correspond to the public needs of the Balearic Islands. 

  4. In the case of acquisition of road passenger transport vehicles it will be necessary for the company to have its tax domicile in the territory of the Balearic Islands.

2. Investments that contribute to the improvement or protection of the environment in the territory of the Balearic Islands

Regulations will determine which heritage elements are considered to contribute to the improvement and protection of the environment in the territory of the Balearic Islands.

3. Research and development expenses derived from research, development and technological innovation activities

Research and development expenses are considered to be those derived from research, development and technological innovation activities referred to in article 35 of the LIS .

Note: The materialization will be deemed to have occurred, even in cases of acquisition through financial leasing, at the moment in which the assets come into operation.

Amount of the materialization of the investments of letter A:

Regulations: See number 6 of section Four of the seventieth Additional Provision. Law 31/2022, of December 23, on General State Budgets for the year 2023

  • Investment in heritage elements: The amount of the materialization reaches the acquisition price or production cost of the assets , excluding interest, indirect state taxes and their surcharges, without it being higher than its market value.

  • Research and development expenses: The amount of the materialization of the reserve in expenses for research, development and technological innovation will also reach to projects contracted with universities, public research organizations or innovation and technology centers, officially recognized and registered and located in the Balearic Islands.

Limits of the amount of the materialization of the investments of letter A

Regulations: See number 6 of section Four of the seventieth Additional Provision. Law 31/2022, of December 23, on General State Budgets for the year 2023

  • Intangible assets: The amount of the materialization of the reserve in equity elements of intangible assets may not exceed 50 percent of the total value of the investment project of which they are part, except in the case of taxpayers that are considered small entities (article 101 LIS) in the tax period in which the benefit is obtained from which the reserve is allocated.

  • Preparatory and consulting studies: 50,100 of the amount of the costs of preparatory studies and consulting will be computed, when they are directly related to the investments provided for in this letter A and they are taxpayers that are considered small entities (article 101 LIS ), in the tax period in which the benefit is obtained from which the reserve is allocated.

Letter B:

Creation of jobs directly related to the investments provided for in letter A), which occurs within a period of six months from the date of entry into operation of said investment and meet certain workforce increase requirements.

The creation of jobs is determined by the increase in the total average workforce of the taxpayer produced in said period with respect to the average workforce of the 12 months prior to the date of entry into operation of the investment, provided that said increase is maintained. for a period of five years, except in the case of taxpayers who meet the conditions of article 101 of the LIS in the tax period in which the benefit from which it is provided is obtained the reserve, who must maintain said increase for three years.

To calculate the company's total average workforce and its increase, the people employed will be taken, in the terms provided by labor legislation, taking into account the contracted day in relation to the full day.

Amount of the materialization of the investments of letter B

Regulations: See number 6 of section Four of the seventieth Additional Provision. Law 31/2022, of December 23, on General State Budgets for the year 2023

In cases of job creation, the materialization will be considered to have occurred only during the first two years since the increase in staff occurs and will be computed, in each tax period, by the amount of the average cost of the gross salaries and mandatory social contributions that correspond to said increase .

Letter C:

The subscription of shares or participations in the capital issued by companies as a result of their constitution or capital increase that carry out their activity in the archipelago, provided that the requirements established in letter C are met. of number 4 of section Four of the seventieth Additional Provision of Law 31/2022, of December 23, on General State Budgets for the year 2023.

These requirements are.

  • These companies will make the investments provided for in letters A and B above, under the conditions regulated in this section. Provided that both the entity subscribing the capital and the one making the investment meet the conditions of article 101 of the LIS (that is, those required to be small entities), in the tax period in which the benefit is obtained from which the reserve is allocated, it will be possible to make the investments of the aforementioned letters A and B under the terms and conditions provided for this type of taxpayers.

  •  These companies must make these investments within three years from the date of accrual of the tax corresponding to the year in which the taxpayer who acquires the shares or interests in their capital had allocated the reserve regulated in this section.

  • The assets acquired in this way d must remain in operation in the Balearic Islands for at least five years in the terms provided for in the last paragraph of number 8 of section Four of the seventieth Additional Provision of the Law. 31/2022, of December 23, of the General State Budgets for the year 2023.

  •  The amount of the acquisition value of the investments made by the investee company must reach, at a minimum, the amount disbursed of the shares or participations acquired by the taxpayer.

The investments made by the investee company will not give rise to the application of any other tax benefits .

For these purposes, the entity subscribing the capital will proceed to reliably communicate to the issuing company the nominal value of the shares or participations acquired, as well as the date on which the term for the materialization of its investment ends. The issuing company will reliably communicate to the entity subscribing its capital the investments made with a charge to its shares or participations whose subscription has led to the materialization of the reserve, as well as their date. The investments made will be understood to be financed with the funds derived from the shares or participations issued according to the order in which their effective disbursement occurred. In the case of disbursements made on the same date, they will be considered to contribute proportionally to the financing of the investment.

Amount of the materialization of the investments of the letter C

Regulations: See number 6 of section Four of the seventieth Additional Provision. Law 31/2022, of December 23, on General State Budgets for the year 2023

The materialization will be considered to have occurred in the amount disbursed on the occasion of its subscription.

The amount disbursed as share premium will also have this consideration. 

Note: The part of the investment financed with subsidies will not be considered as the amount of materialization of the reserve