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Practical Handbook for Companies 2021

Deduction for the creation of employment

Regulation:Article 37 LIS


With effect for the tax periods beginning on 1 January 2019, the sole repealing provision of Royal Decree-Law 28/2018, of 28 December, for the revaluation of public pensions and other urgent measures in social, labour and employment matters, repeals article 4 of Law 3/2012, of 6 July, on Urgent Measures for the Reform of the Labour Market, which established the possibility of concluding employment contracts for an indefinite period of time to support entrepreneurs.

However, the sixth transitory provision of the aforementioned Royal Decree-Law 28/2018 establishes that the employment contracts for an indefinite period of time to support entrepreneurs entered into before 1 January 2019, are considered to be valid and will continue to be governed by the regulations in force at the time of their conclusion, as well as the corresponding incentives, where applicable.

Therefore, the contracts signed during 2018 will generate the right to apply the deduction for job creation of article 37 of the LIS.This deduction, in accordance with the provisions of Article 37 of the LIS, will be applied to the full tax liability for the tax period corresponding to the end of the one-year trial period required for the corresponding type of contract.

Consequently, for contracts validly concluded between 7 November 2018 and 31 December 2018 whose probationary period ends in one year, this increased job creation deduction can be applied in the 2019 tax year, in the event that the tax period coincides with the calendar year.

Regarding year 2020, , the right to apply this increased deduction cannot be generated as from 1 January 2019 such contracts cannot be entered into.

  • With effect for tax periods beginning on or after 7 November 2018, Article 94 bis of Law 20/1991, of 7 June, establishes that entities that hire a worker to carry out their activity in the Canary Islands shall be entitled to enjoy the tax benefits for job creation established by the tax regulations, increasing them by 30 percent. Therefore, this increase will be applied to the deduction for job creation of article 37 of the LIS as follows:

    • Job creation by hiring people under 30 years of age: 3,900 euros (3,000 euros x 1.3) for hiring the first worker through an open-ended contract to support entrepreneurs, who is under 30 years of age.

    • Job creation by hiring unemployed people on unemployment benefit: 65 per cent (50 per cent x 1.3) of the lesser of the amounts set out in letters a) and b) of Article 37.2 of the LIS.

  • The increased percentages of article 94.1 a) of Law 20/1991, will not be applied to this deduction , as this deduction is not equivalent to any of the deductions regulated in Law 61/1978.

    For the same reason, the increased limits of article 94.1 b) of Law 20/1991 do not apply to this deduction .