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Practical manual for Income Tax 2023.

By investment in the acquisition of shares or social participations of new or recently created entities

Regulations: Art. 7 Revised Text of the legal provisions of the Autonomous Community of the Balearic Islands on taxes transferred by the State, approved by Legislative Decree 1/2014, of June 6

Amounts and maximum limit of deduction

1. In general terms

  • 30 percent of the amounts invested during the year in the acquisition of shares, corporate interests or mandatory or voluntary contributions made by partners as a result of agreements to form companies or increase capital in entities that have the nature of a Public Limited Company, Limited Company, Public Limited Labour Company, Limited Labour Company or Cooperative Company.

  • Maximum limit:  

    In the case of individual declaration: 6,000 euros per year .

    In the case of joint declaration : 6,000 euros for each taxpayer in the family unit who made the investment.

  • This deduction will be applied in the year in which the investment is made and in the following two with a limit of 6,000 euros per year.

    Once the investment has been made, the right to a deduction of 30% of the amount invested is generated, with a maximum limit of 6,000 euros per year, in the year in which the investment is made and in the two following years.

    In the event that there is a right to apply the deduction for investments made in different years, it will be applied in the order of seniority. For investments made in 2021, 2022 or 2023, the single limit will be 6,000 euros.

    The total deduction applied cannot exceed 6,000 euros per taxpayer .

    Note:Please note that for taxpayers who died before April 14, 2023, the previous limit will be 6,600 euros.

    Likewise, will not form part of the basis of this deduction the amounts paid by them in the form of voluntary or mandatory contributions .

2. For investments made in companies owned by research centers or universities

  • 50 percent of the amounts invested in companies owned by research centers or universities with a maximum amount of 12,000 euros per fiscal year and per taxpayer.

  • This limit is not independent of the general limit of 6,000 euros. Therefore, if a taxpayer makes investments in companies owned by research centres or universities and other investments in the acquisition of shares or equity interests in new or recently created entities, the maximum deduction limit will be 12,000 euros.

    Note: Please note that for taxpayers who died before April 14, 2023, the above limits will be 13,200 and 6,600 euros.

Requirements and other conditions for the application of the deduction

  1. 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, cannot exceed 40% of the share capital of the company that is the object of the investment or of the voting rights in the company.

  2. The entity in which the investment is to be made must meet the following requirements :

    1. It must be in the nature of Public Limited Company, Limited Company, Labor Public Limited Company or Labor Limited Company or Cooperative Company.

      Note: Please note that for taxpayers who have died before April 14, 2023, the entity in which the investment must be made can only be a Public Limited Company, Limited Company, Labor Public Limited Company or Labor Limited Company.

    2. Have your registered office and tax domicile in the Balearic Islands .

    3. Develop an economic activity, without having as its main activity 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 the Wealth Tax, nor engage in the activity of leasing real estate.

    4. At least must employ a person domiciled for tax purposes in the Balearic Islands with a full-time employment contract, registered with the general Social Security regime and who is not a partner or shareholder in the company.

    5. In the event that the investment has been made through a capital increase, company must have been incorporated within the two years prior to the date of this increase unless it is an innovative company in the field of research and development which, in accordance with the provisions of Order ECC /1087/2015, of June 5, which regulates the obtaining of the seal of innovative small and medium-sized enterprises and creates and regulates the Registry of Innovative Small and Medium-sized Enterprises, has this seal in force and is registered in said registry.

    6. You must maintain jobs . For this purpose, this requirement will be considered to be met when the total average workforce is maintained, in terms of people per year regulated by labor regulations, calculated as provided for in article 102 of the LIS .

      Regarding the LIS see Law 27/2014, of November 27, on Corporate Tax.

    7. The annual turnover of the entity may not exceed the limit of 2,000,000 euros , calculated as provided for in article 101 of the LIS .

  3. The taxpayer may be a member of the board of directors of the company in which the investment has been made, but may not perform executive or management functions under any circumstances. You may also not maintain an employment relationship with the entity that is the object of the investment.

  4. Operations in which the deduction is applicable must be formalized in a public deed , in which the identity of the investors and the amount of the respective investment will be specified.

  5. The acquired shares must kept in the taxpayer's assets for a minimum period of four years

  6. The requirements set out in points 2, 3, 4, 6 and 7 of letter b above and the maximum participation limit set out in letter a, as well as the prohibition contained in letter c, must be met for a minimum period of four years from the effective date of the capital increase agreement or the incorporation of the entity that gives rise to the right to the deduction.

Loss of the right to the deduction made

Failure to comply with the requirements and conditions set out in letters a, c, e and f above entails the loss of the tax benefit, and the taxpayer must include in the IRPF declaration for the year in which the failure to comply occurred the part of the tax that has not been paid as a result of the deduction made, together with any accrued late payment interest.

Important: Taxpayers entitled to the deduction must complete the section "Additional information on the regional deduction for investment in the acquisition of shares and equity interests in new or recently created entities" of the corresponding annex B.8 of the declaration form 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, also indicating the total amount of the deduction for investments in newly or recently created companies.