Skip to main content
Practical Manual of Companies 2020.

Deduction for investments in West African territories and for advertising and publicity expenses

Regulation: Article 27 bis Law 19/1994

1. Scope

  • Entities subject to Corporate Tax with tax domicile in the Canary Islands that meet certain requirements regarding the amount have the right to apply these deductions. net of the turnover in the immediately preceding tax period and with respect to the average workforce in said period.

    In the case of entities that are part of a group of companies within the meaning of article 42 of the Commercial Code , regardless of residence and the obligation to prepare consolidated annual accounts, the The net amount of the turnover and the average workforce will refer to the set of entities belonging to the same group.

  • When the entity is newly created, the net amount of the turnover will refer to the first tax period in which the activity is actually carried out. If the immediately preceding tax period had a duration of less than one year, or the activity had been carried out for a shorter period, the net amount of the turnover will be increased to one year.

  • The deduction for investments in West African territories will be applied in the tax period in which the investee entity or permanent establishment begins economic activity, and will be conditional on an increase of the average workforce in the Canary Islands of the taxpayer in that tax period with respect to the average workforce existing in the previous tax period and the maintenance of said increase for a period of 3 years.

2. Requirements and amount of the deduction

This deduction will not apply the increased rates of article 94.1. a) of Law 20/1991 . The reason is that, although this deduction is similar to the deduction for export activities included in article 26 of Law 61/1978, it is worth remembering that said deduction was repealed as a consequence of Decision C (2006) 444 final, of March 22, 2006, in which it was declared as state aid not compatible with the common market. Consequently, it would not be possible to properly speak of a deduction equivalent to that existing in Law 61/1978, because it was declared contrary to Community Law.

Entities subject to Corporate Tax with tax domicile in the Canary Islands, may apply the following deductions:

  1. When the net amount of the turnover in the immediately preceding tax period is equal to or less than 10 million euros and with an average workforce in said period of less than 50 people:

    1. Entities may deduct 15 percent of the investments that are actually made in the constitution of subsidiaries or permanent establishments in the Kingdom of Morocco, in the Islamic Republic of Mauritania, in the Republic of Senegal, in the Republic of Gambia, in the Republic of Guinea Bissau and in the Republic of Cape Verde, provided that these entities carry out economic activities in said territories within the period 1 year from the moment of investment. The application of the deduction will require:

      • That the entity, alone or jointly with other entities with tax domicile in the Canary Islands, holds a percentage of participation in the capital or equity of the subsidiary of at least 50 percent , and

      • That the investment in said investee entity or permanent establishment is maintained for a period of at least 3 years.

    2. Entities may deduct 15 percent on the amount paid for multi-year projection propaganda and advertising expenses for product launches, opening and prospecting of markets abroad and attendance at fairs, exhibitions and similar events, including in this case those held in Spain on an international basis.

  2. When the net amount of the turnover in the immediately preceding tax period does not exceed 50 million euros and with an average workforce in said period of less than 250 people, the deductions indicated in the section a) will be applied with a percentage of 10 percent.

3. Applicable limits

  • Article 27.bis.3 of Law 19/1994 establishes in its second paragraph that the limits of article 39.1 of the LIS ##2 .

  • Under no circumstances may the increased limits of article 94.1 be applied to this . b) of Law 20/1991. The reason is that, as already indicated in section 1.2.2, although this deduction is similar to the deduction for export activities included in article 26 of Law 61/1978, it is worth remembering that said deduction was repealed as a consequence of Decision C (2006) 444 final, of March 22, 2006, in which it was declared as State aid not compatible with the common market.