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Practical Manual of Companies 2020.

Common rules on deductions to encourage certain activities

Regulation: Article 39.1 LIS

The following common provisions are established for the deductions provided for in Chapter IV of Title VI of the LIS:

  • These deductions will be made once the deductions and bonuses of Chapters II and III of Title VI of the LIS have been made.

    Keep in mind:

    By applying the deductions for investments for the year established in the Corporate Tax Law, and the pending balances of deductions regulated both in previous Corporate Tax laws, as well as in the different General State Budget Laws or in laws that establish specific regimes , the order established in section 1 of the twenty-fourth transitional provision of the LIS or in article 39.1 of the same must be taken into account.

    Deductions for investments will be made once the deductions and bonuses of Chapters II and III of Title VI of the LIS have been applied, as well as the deductions to avoid double taxation pending application, which could be regulated in laws regulating Corporate Tax. prior to the LIS.

  • The amounts corresponding to the tax period not deducted may be applied in the settlements of the tax periods that end in the immediate 15 years and successive .

    However, the amounts corresponding to the deduction for research and development and technological innovation activities provided for in article 35 of the LIS, may be applied in the settlements of the periods tax obligations that conclude in the immediate and successive 18 years .

    Keep in mind:

    The provisions of this point will also apply to deductions under the regime of article 27.3 First of Law 49/2002, generated in 2020 and that have not been deducted in this declaration.

  • The calculation of the deadlines for the application of deductions may be deferred until the first year in which, within the limitation period, positive results occur, in the following cases:

    • In newly created entities.

    • In entities that clean up losses from previous years through the effective contribution of new resources, without the application or capitalization of reserves being considered as such.

  • The amount of the deductions provided for in this Chapter IV to which this section refers, applied in the tax period, may not jointly exceed 25 percent of the full quota reduced by deductions to avoid international double taxation and bonuses. However, the limit will be raised to 50 percent when the amount of the deduction provided for in article 35 of this Law, which corresponds to expenses and investments made in the tax period itself, exceeds 10 percent of the full quota, reduced by deductions to avoid international double taxation and bonuses.

    Keep in mind:

    This joint limit will be applied to all the deductions that are included in table «Deductions to encourage certain activities ( Chap. IV Title VI, DT 24.3 LIS and art. 27.3 first Law 49/2002)» on pages 17 and 18 of model 200.

  • The same investment may not give rise to the application of more than one deduction in the same entity unless expressly provided, nor may it give rise to the application of a deduction in more than one entity.

  • The assets subject to the deductions provided for in this chapter to which this section refers, must remain in operation for 5 years, or 3 years , if it is movable property, or during its useful life if it is shorter.

    Together with the fee corresponding to the tax period in which non-compliance with this requirement is manifested, the deducted amount will be entered, in addition to late payment interest.

  • The right of the Administration to initiate the procedure for verifying the deductions provided for in this Chapter applied or pending to be applied will expire after 10 years counting from the day following the day on which the deadline established for submitting the declaration or self-assessment corresponding to the tax period in which the right to apply was generated.

    After this period, the taxpayer must prove the deductions whose application they intend to apply, by displaying the liquidation or self-assessment and the accounting, with proof of their deposit during the aforementioned period in the Commercial Registry.