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Practical Handbook for Companies 2021

Deduction for research and development activities

Regulation:Article 35.1 LIS

  • In order to apply the deduction for research and development activities carried out in the Canary Islands, entities must comply with the general requirements established for these deductions in article 35.1 of the LIS.

  • On the percentages established in Article 35.1 of the LIS for research and development expenses, the increased percentages of Article 94.1.a) of Law 20/1991 will be applied. The reason is that the deduction for research and development activities continues to be applied in the Canary Islands in accordance with the deduction regime in force at the time of the repeal of Article 26 of Law 61/1978 and with the special features introduced by Article 94 of Law 20/1991.

    For this purpose, research and development expenditure incurred during the year shall be subject to 45 per cent and over-expenditure in relation to the average of the previous two years shall be subject to 75.6 per cent. Likewise, the 28 per cent of investments in tangible and intangible fixed assets, excluding real estate and land, is deductible, provided that they are used exclusively for research and development activities.Finally, there is an additional deduction of 37 per cent applicable to personnel costs for qualified researchers assigned exclusively to research and development activities.

  • In the same way that the percentages are increased, will also increase the limits applicable to this deduction in accordance with the provisions of article 94.1. b) of Law 20/1991, and will therefore be subject to the joint limit of 60/90 or 70/100 (La Palma, La Gomera and El Hierro) percent.

    In the event that the taxpayer exercises the option provided for in Article 39.2 of the LIS, these deductions will not be subject to the joint limit of 60/90 or 70/100 (La Palma, La Gomera and El Hierro) per cent established in Article 94.1 b) of the LIS.