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Practical Handbook for Companies 2021

Special cases

  1. The article 94.1 of Law 20/1991, of 7 June establishes that companies and other legal entities subject to Corporation Tax, with fiscal domicile in the Canary Islands, may, from the first financial year closed after 31 December 1991, and in relation to the investments made and which remain in the archipelago, avail themselves of the deduction system provided for in article 26 of Law 61/1978, of 27 December, on Corporation Tax, in accordance with the following peculiarities:

    1. The rates applicable on the investments made will be 80 per cent higher than those of the general scheme, with a minimum differential of 20 percentage points.

    2. Deduction for investment in the Canary Islands, shall be maximum limit the percentage indicated below of the net tax liability resulting from reducing the gross tax liability by the amount of the deductions for double taxation and, where applicable, the allowances provided for in Article 25 of Law 61/1978, of 27 December, on Corporate Income Tax.This percentage shall always be 80 per cent higher than that fixed for each modification of the investment deduction in the general scheme with a minimum differential of 35 percentage points.However, on the islands of La Palma, La Gomera and El Hierro, the minimum ceiling of 80 per cent will be increased to 100 per cent and the minimum differential will increase to 45 percentage points when the Community regulations on state aid so permit and when the investments are covered by Law 2/2016 of 27 September and other laws on measures for the organisation of economic activity on these islands.

  2. On the other hand, article 94.2 of Law 20/1991 establishes that the deduction regime for investments of this article will also apply to companies and other legal entities that do not have their tax domicile in the Canary Islands, with respect to permanent establishments located in this territory and provided that the investments corresponding are made and remain in the Canary Islands.

    In these cases, the maximum deduction limit on the net tax liability referred to in Article 94.1.b) of Law 20/1991, will be applied independently of that corresponding to investments under the general regime.

    This same criterion will also be applied to investments made in mainland Spain or the Balearic Islands, through permanent establishments, by the entities domiciled in the Canary Islands.