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Practical manual for Income Tax 2023.

For investment in the acquisition of shares or equity interests in new or recently created entities and their financing

Regulations: Art. 5.Ten Text Consolidated version of the legal provisions of the Autonomous Community of Galicia on taxes transferred by the State, approved by Legislative Decree 1/2011, of July 28

1. In general

Amount and maximum limit of the deduction

Taxpayers will be able to deduct the following amounts from the autonomous community's full tax rate, with a joint limit of euros

  • 30 percent of the amounts invested during the year in the acquisition of share capital as a result of agreements to establish companies or increase capital in public limited companies, labor companies and cooperatives.

  • With respect to the same entities, 30% of the amounts lent during the year may be deducted, as well as the amounts personally guaranteed by the taxpayer, provided that the loan is granted or the guarantee is established in the year in which the company is incorporated or its capital is increased.

Requirements and other conditions for the application of the deduction

  • The taxpayer's participation, computed together with those of the spouse or persons related by reason of kinship, in a direct or collateral line, by consanguinity or affinity up to the third degree included, may not exceed 40% or less than 1% of the share capital of the company that is the object of the investment or of its voting rights at any time and during the three years following its incorporation or expansion.

    In the case of a loan or guarantee, the taxpayer's participation in the capital will not be necessary, but if it exists, it cannot exceed 40%, with the same time limits as above. The amount lent or guaranteed by the taxpayer must be greater than 1% of the company's net worth .

    The maximum limit of participation in the share capital will not apply in the case of worker companies or cooperatives composed of only two partners, as long as this circumstance is maintained.

  • The entity in which the investment, loan or guarantee must be made must meet the following requirements:

    1. It must have its registered office and tax domicile in Galicia and maintain it for three years following incorporation or expansion.

    2. Must carry out an economic activity during the three years following the constitution or expansion. For this purpose, its main activity must not be the management of movable or immovable assets, in accordance with the provisions of article 4.8. Two.a) of Law 19/1991, of June 6, on Wealth Tax.

    3. You must have, at least, one person employed with a full-time employment contract , registered in the general Social Security system and with habitual residence in Galicia. The contract will have a minimum duration of one and must be formalized within two following the constitution or extension, except in the case of labor companies or cooperative companies.

    4. In the event that the investment was made by means of a capital increase or the loan or guarantee had been made in the year of an increase, the commercial company must have been incorporated in the three years prior to the date of this increase, and in addition, during the twenty-four months following the date of the start of the tax period of the Corporate Tax in which the increase was made, its average workforce with habitual residence in Galicia must have increased, by at least one person with respect to the average workforce with habitual residence in Galicia in the previous twelve months , said increase being maintained for an additional period of another twelve months , except in the case of worker companies or cooperative companies.

      To calculate the total average staff of the organisation and the growth thereof, the number of persons employed will be decided in accordance with the provisions of labour legislation, taking into account the contracted hours in relation to a full day.

  • The taxpayer may be a member of the board of directors of the company in which the investment was made, but may not in any case carry out executive or management functions for a period of ten years . Nor may it maintain an employment relationship with the entity that is the object of the investment during that same period, except in the case of labor companies or cooperative companies .

  • The operations in which the deduction is applicable must be formalized in public deed , in which the identity of the taxpayers who intend to apply this deduction and the amount of the respective operation must be specified.

  • The acquired shares must remain in the taxpayer's assets for a minimum period of three years, following the incorporation or expansion.

    In the case of loans, these must refer to financing operations with a term of more than five years, not being able to amortize an amount greater than 20% per year of the amount of the principal loaned. In the case of guarantees, these will extend to the entire duration of the guaranteed operation, and may not be less than five years.

2. Additional increase in the deduction for certain circumstances

  • The deduction may be increased by an additional 15% when, in addition to meeting the requirements established for the deduction in general, one of the following circumstances occurs :

    1. The acquisition of shares or corporate interests as a result of agreements to incorporate or increase capital, in the case of public limited companies, limited liability companies, labour companies and cooperatives that prove to be innovative small and medium-sized companies, in accordance with the provisions of Order ECC /1087/2015, of 5 June, which regulates the obtaining of the seal of innovative small and medium-sized company and creates and regulates the operation of the Registry of Innovative Small and Medium-sized Companies.

    2. The acquisition of shares or corporate interests as a result of agreements to incorporate or increase capital, in the case of public limited companies, limited liability companies, labour companies and cooperatives that prove to be companies promoting a business project that has obtained qualification as a technology-based employment initiative , in accordance with the provisions of Decree 56/2007, of 15 March, which establishes a support programme for technology-based employment initiatives ( IEBT ), by registering the initiative in the Administrative Registry of Technology-Based Business Initiatives.

    3. The acquisition of shares or corporate interests as a result of agreements for the constitution or increase of capital, in the case of public limited companies, limited companies, labour companies and cooperatives in which universities or research organisations have a stake.

  • The maximum limit of the deduction in these cases is 35,000 euros.

Attention: The deduction percentage applicable to investments in which these circumstances apply will be 45% (30% + 15%) and the limit of 35,000 euros applicable to the calculation of the deduction, in these cases, is independent of the general limit of 20,000 euros.

Incompatibility

The deduction contained in this section will be incompatible, for the same investments, with the deductions "For investment in the acquisition of shares or corporate interests in new or recently created entities" provided for in article 5. Nine of Legislative Decree 1/2011, "For investment in shares of entities listed in the expansion segment of the alternative stock market" provided for in article 5.Eleven of Legislative Decree 1/2011 and "For investment in companies that carry out agricultural activities" provided for in article 5.Fifteen of Legislative Decree 1/2011.

Note: Taxpayers entitled to the deduction must complete the section "Additional information on the Galician regional deduction for investment in the acquisition of shares or equity interests in new or recently created entities and their financing" in Annex B.8 of the declaration in which, in addition to the amount of the investment entitled to deduction, the NIF of the newly or recently created entity must be stated and, if applicable, that of the second entity, indicating the total amount of the deduction for investments in newly or recently created companies and their financing in the corresponding box.