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Practical Handbook for Companies 2021

Applicable limits

In the same way that the percentages are increased, will also increase the limits applicable to this deduction in accordance with article 94.1.b) of Law 20/1991.

The deduction for investments in new fixed assets in the Canary Islands is subject to an increased individual limit of 50 per cent of the gross tax liability, less deductions for the avoidance of internal and international double taxation and allowances (box [00582] "Cuota íntegra ajustada positiva" on page 14 of form 200).This limit is determined by application of the provisions of paragraph 7 of the twelfth additional provision of Law 43/1995 (15 per cent) and Article 94.1.b) of Law 20/1991, which increases the limit by 80 per cent to that set for each modification of the deduction for investments in the general system with a minimum differential of 35 percentage points.In this case the increased individual limit is set at 50 per cent, because it is the higher of the two following limits:

  • 15% x 1,8 = 27%
  • 15% + 35% = 50%.

With effect for the tax periods starting from 7 November 2018, for the islands of La Palma, La Gomera and El Hierro, if we apply to the general individual limit of 15 percent the provisions of article 94.1.b) Law 20/1991 which establishes that the minimum limit of 80 percent will be increased to 100 percent and the minimum differential will increase to 45 percentage points, provided that the Community regulations on state aid so permit and the investments are covered by Law 2/2016, of 27 September and other laws on measures for the organisation of economic activity in these islands, the limit of 15 percent will be increased to 60 percent, since according to the following calculations it is the higher of:

  • 15% x 2 = 30%
  • 15% + 45% = 60%.

This increased individual limit of 50 percent (60 percent for the islands of La Palma, La Gomera and El Hierro) applies both to the deduction for investments in new fixed assets generated in the same tax period, as well as to from previous tax periods.

With regard to the outstanding balances of the deductions for investments under Article 26 of Law 61/1978, including the deduction for investments in new fixed assets, except for the deduction for job creation, paragraph 4 of the eleventh transitional provision of Law 43/1995 (included in paragraph 1 of the eighth transitional provision of TRLIS), establishes that the deductions from different tax modes or tax periods under Article 26 of Law 61/1978, of 27 December, on Corporate Income Tax, except for the deduction for job creation, may not exceed a joint limit of 35 per cent of the net tax payable.

For these purposes, insofar as the only deduction pending application from previous tax periods, by application of Article 26 of Law 61/1978, is the deduction for investments in new fixed assets in the Canary Islands, in the event that amounts of this deduction from different tax periods concur, the joint limit of 35 per cent referred to in paragraph 4 of the eleventh transitional provision of Law 43/1995 will be applicable.

Therefore, the joint limit of 35 per cent in accordance with the provisions of article 94.1.b) of Law 20/1991 for the case of the deduction for investments in new fixed assets in the Canary Islands pending application from previous tax periods (excluding the amount of the deduction for the period being declared), will be increased to 70 percent, as it is the higher of the following two:

  • 35% x 1,8 = 63%
  • 35% + 35% = 70%.

With effect for the tax periods starting from 7 November 2018, for the islands of La Palma, La Gomera and El Hierro, if we apply to the general joint limit of 35 percent the provisions of article 94.1.b) of Law 20/1991 which establishes that the minimum limit of 80 percent will be increased to 100 percent and the minimum differential will increase to 45 percentage points, when the Community regulations on state aid so permit and in the case of investments contemplated in Law 2/2016, of 27 September and other laws on measures for the organisation of economic activity in these islands, the limit of 35 percent will be increased to 80 percent, since according to the following calculations it is the highest of:

  • 35% x 2 = 70%
  • 35% + 45% = 80%.

In this way, taxpayers may deduct in the period covered by the tax return the amount of the deduction for investments in new fixed assets in the Canary Islands with an individual limit of 50 per cent on the adjusted gross tax liability.In addition, for the outstanding balances of this deduction from previous tax periods (excluding the amount of the deduction for the period being declared), a joint limit of 70 per cent will be applied to this adjusted gross tax liability .