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Practical Handbook for Companies 2021

RIC case studies

Example 1

In the tax period beginning on 1 January 2020, company "A", domiciled in the Canary Islands, makes an allocation of 1,000 euros to the RIC, charged to the profits of the financial year 2020.In the same period, this company has a non-distributable profit of 1,000,000 euros.

In the financial year 2021, it acquires tangible fixed assets for 1,000 euros, which contribute to improving the environment in the Canary Islands.In the same period, this company has a non-distributable profit of 1,000,000 euros.

As in the financial year 2020, in the financial year 2021 company A has a non-distributable profit of EUR 1,000,000.

In this case, the reduction that company A may apply to its taxable income is limited to 90 per cent of the part of the profit obtained which is not distributed:

Limit:90% x 1,000,000 euros = 900,000 euros.

Financial year 2020:

Company "A" makes an allocation of 1,000 euros to the RIC from 2020 profits (it can do so because it complies with the limit, as 1,000 euros < 900,000 euros), so should enter an amount of 1,000 euros in the row "Amount of the RIC allocation from 2020 profits" of the table "Special regime of the reserve for investments in the Canary Islands (Law 19/1994)" on page 22 of form 200.

In addition, should complete on page 13 of form 200, box [00404] "Reserve for investments in the Canary Islands (Law 19/1994)" (negative adjustment) in the amount of 1,000 euros, as this is the value of the reduction in the taxable base for the financial year 2020 that is made due to the allocation to the RIC.

However, an amount of 1,000 euros remains to be materialised in subsequent periods.For this reason, company "A" should complete, in the first table on page 22 of Form 200, the column "Pending materialisation of RIC in future periods", in the row corresponding to RIC 2020 for the amount of 1,000 euros.

Accordingly, company A shall complete the adjustment on page 13 and the table on page 22 of Form 200 for the financial year 2020 as follows:

Detail of corrections to the result of the P and G account (page 13 of Form 200)

Canary Islands investment reserve (Law 19/1994)

[00403]

---

[00404]

1,000

Special regime for the reserve for investments in the Canary Islands (page 22 of form 200)
RICTo be materialised
RIC at the beginning
period
Implemented / materialised in this settlementTo be materialised
RIC at end of period
Planned investments
letters A and B, Art. 27.4 Law 19/1994
Planned investments
B bis, C and D, Art. 27.4 Law 19/1994
Anticipated investments
considered materialisation
of the RIC in this settlement
RIC 2020 --- --- --- --- 1,000
Amount of RIC endowment against 2020 profits
[00927] 1,000

Financial year 2021:

Company "A" does not make an allocation to the RIC in this financial year, so should not fill in the row "Amount of the RIC allocation charged to profits in 2021" of the table "Special regime of the reserve for investments in the Canary Islands (Law 19/1994)" on page 22 of form 200.

Furthermore, should not complete box [00404] "Reserve for investments in the Canary Islands (Law 19/1994)" (negative adjustment) on page 13 of form 200, as the taxable base for 2021 will not be reduced due to the allocation to the RIC.

Note that the investment made by company B in 2021 is not considered an early investment because, although no RIC is endowed in 2021, the investment in this year is a materialisation of the endowment of the reserve made in 2020.

At the beginning of the financial year 2021, 1,000 euros remain to be materialised of the allocation to the RIC charged to 2020 profits made in the financial year 2020, so company "A" must enter in the first table on page 22 of Form 200 relating to the Special Regime of the reserve for investments in the Canary Islands (Law 19/1994) the column "Pending materialisation of RIC at the beginning of the period", in the row corresponding to the RIC 2020, the amount of 1,000 euros.

The amount invested in the period 2021 is 1,000 euros, so company "A" must complete the first table on page 22 of Form 200 relating to the Special Regime of the reserve for investments in the Canary Islands (Law 19/1994), entering in the column "Investments foreseen in letters B bis, C and D, art. 27.4 Law 19/1994", in the row corresponding to RIC 2020, the amount of the materialisation, i.e. 1,000 euros.In the financial year 2021, , the total amount of the endowment made during 2020 is realised, so that nothing remains to be realised for future years.For this reason, company "A" should not complete the column "Pending RIC materialisation at end of period".

Thus, the adjustment on page 13 and the table on page 22 of Form 200 for the financial year 2021 shall be completed as follows:

Detail of corrections to the result of the P and G account (page 13 of Form 200)

Canary Islands investment reserve (Law 19/1994)

[00403]

---

[00404]

0

Special regime for the reserve for investments in the Canary Islands (page 22 of form 200)
RICTo be materialised
RIC at the beginning
period
Implemented / materialised in this settlementTo be materialised
RIC at end of period
Planned investments
letters A and B, Art. 27.4 Law 19/1994
Planned investments
B bis, C and D, Art. 27.4 Law 19/1994
Anticipated investments
considered materialisation
of the RIC in this settlement
RIC 2020 1,000 --- 1,000 --- 0
Amount of the RIC allocation from 2021 profits
[00927] 0

Example 2

In the tax period starting on 1 January 2020, company B, domiciled in the Canary Islands, acquires tangible fixed assets for EUR 1,000 which contribute to improving the environment in the Canary Islands.

Company B does not make any allocation to the RIC in the financial year 2020.

In 2021, it does not make any investment in which the RIC can be realised, although company B records an allocation to the RIC of 1,000 euros in 2022, charged to the profits of 2021.

In both the financial year 2020 and 2021, company B has non-distributable profits of EUR 1,000,000.

In both 2020 and 2021, the reduction that company B may apply to its tax base shall be limited to 90 per cent of the part of the profit obtained that is not subject to distribution:

Limit:90% x 1,000,000 euros = 900,000 euros.

Financial year 2020:

Company "B" does not make an allocation to the RIC in this financial year, so will not have to fill in the row "Amount of the RIC allocation charged to 2020 profits" of the table "Special regime of the reserve for investments in the Canary Islands (Law 19/1994)" on page 22 of form 200.

Furthermore, should not complete box [00404] "Reserve for investments in the Canary Islands (Law 19/1994)" (negative adjustment) on page 13 of form 200, as the tax base for 2020 will not be reduced due to the allocation to the RIC.

The amount invested in advance in the financial year 2020 is 1,000 euros, so it remains pending to endow the RIC against profits obtained until 31 December 2023 for this amount.In this case, company "B" will have to fill in the table relating to Anticipated Investments, specifically the box corresponding to the column "Investments foreseen in letters B bis, C and D, art. 27.4 Law 19/1994" for the amount of 1,000 euros, as well as, from that same row the box "Pending to endow RIC at the end of the period" for the amount of 1,000 euros. In addition, must report the materialisation and its financing system together with the corporate income tax return in the financial year 2020.

Thus, the adjustment on page 13 and the table on page 22 of Form 200 for the financial year 2020 shall be completed as follows:

Detail of corrections to the result of the P and G account (page 13 of Form 200)

Canary Islands investment reserve (Law 19/1994)

[00403]

---

[00404]

0

Special regime for the reserve for investments in the Canary Islands (page 22 of form 200)
Investments
anticipated
Pending
endow RIC
at the beginning of the period
Planned investments
letters A and B,
art. 27.4 Law 19/1994
Planned investments
letters B a, C and D,
art. 27.4 Law 19/1994
To be endowed
RIC at end of period
Anticipated investments 2020 --- --- 1,000 1,000
Amount of RIC endowment against 2020 profits
[00927] 0

Financial year 2021:

Company "B" makes an allocation to the RIC of 1,000 euros from this year's profits (it can do so because it complies with the limit, as 1,000 euros < 900,000 euros), so should enter an amount of 1,000 euros in the row "Amount of the RIC allocation Amount of the RIC allocation from 2021 profits" of the table "Special regime of the reserve for investments in the Canary Islands (Law 19/1994)" on page 22 of form 200.

In addition, should complete on page 13 of form 200, the box [00404] "Reserve for investments in the Canary Islands (Law 19/1994)" (negative adjustment) for the amount of 1,000 euros, as this is the value of the reduction in the taxable base for the financial year 2021 that is made as a result of the allocation to the RIC.

In the financial year 2021 company "B" does not make any investment, but will be considered as materialised in this financial year 2021 the investment made in 2020.Therefore, this company should fill in the first table on page 22 of Form 200 relating to the Special Regime of the reserve for investments in the Canary Islands (Law 19/1994) in the column "Anticipated investments considered materialisation of the RIC in this settlement", in the row corresponding to RIC 2021, for the amount that is considered materialised in 2021 because the RIC has been endowed, i.e. 1,000 euros.

Company "B" should also complete the Advance Investments table at . At the beginning of the financial year 2021, the RIC in the amount of 1,000 euros remains to be endowed, due to the anticipated investment made in the financial year 2020.For this reason, company "B" should complete the column "Pending RIC endowment at the beginning of the period", in the row corresponding to RIC 2020 for the amount of 1,000 euros.The amount invested in 2020 was 1,000 euros and the endowment to the RIC in 2021 was 1,000 euros, so that at the end of the financial year 2021 there is no RIC pending to be endowed for any amount.For this reason, company "B" should not fill in the column "Pending RIC endowment at the end of the period", in the row corresponding to RIC 2020.

Thus, the adjustment on page 13 and the table on page 22 of Form 200 for the financial year 2021 shall be completed as follows:

Detail of corrections to the result of the P and G account (page 13 of Form 200)
Canary Islands investment reserve (Law 19/1994) [00403] --- [00404] 1,000
Special regime for the reserve for investments in the Canary Islands (page 22 of form 200)
RICTo be materialised
RIC at the beginning
period
Implemented / materialised in this settlementTo be materialised
RIC at end of period
Planned investments
letters A and B, Art. 27.4 Law 19/1994
Planned investments
B bis, C and D, Art. 27.4 Law 19/1994
Anticipated investments
considered materialisation
of the RIC in this settlement
RIC 2020 --- --- --- --- ---
RIC 2021 --- --- --- 1,000 ---
Amount of the RIC allocation from 2021 profits
[00927] 1,000
Investments
anticipated
Pending
endow RIC
at the beginning of the period
Planned investments
letters A and B,
art. 27.4 Law 19/1994
Planned investments
letters B a, C and D,
art. 27.4 Law 19/1994
To be endowed
RIC at end of period
Anticipated investments 2020 1,000 --- --- 0
Anticipated investments 2021 --- --- --- ---

Example 3

In the tax period starting on 1 January 2019, company C, domiciled in the Canary Islands, acquires tangible fixed assets for EUR 1,000 which contribute to improving the environment in the Canary Islands.

Company "C" makes an allocation of 200 euros to the RIC from the profits of the financial year 2019.

In the financial year 2020, company C does not make any investment in which the RIC can be realised, although, with a charge to the profits of this financial year, this company makes an allocation to the RIC in the amount of 600 euros.

In the financial year 2021, company C does not make any investment in which the RIC can be materialised, although, with a charge to the profits of this financial year, this company makes an allocation to the RIC in the amount of 800 euros.

In the financial year 2019 as well as in the financial years 2020 and 2021, company C has non-distributable profits of EUR 1,000,000.

For the tax years 2019, 2020 and 2021, the reduction that company C may apply to its taxable income shall be limited to 90 per cent of the part of the profit obtained that is not subject to distribution:

Limit:90% x 1,000,000 euros = 900,000 euros.

Financial year 2019:

N.B.:This example assumes that in the financial year 2019 the table on Anticipated Investments was already in place.

Company "C" made an allocation of 200 euros to the RIC from this year's profits (it can do so because it complies with the limit, as 200 euros < 900,000 euros), so should enter an amount of 200 euros in the row "Amount of the RIC 2019 allocation" of the table "Special regime of the reserve for investments in the Canary Islands (Law 19/1994)" on page 22 of form 200.

In addition, should complete on page 13 of form 200, the box [00404] "Reserve for investments in the Canary Islands (Law 19/1994)" (negative adjustment) for the amount of 200 euros, as this is the value of the reduction in the taxable base for 2019 that was made due to the allocation to the RIC.

In 2019, company "C" must fill in the first table on page 22 of Form 200 relating to the Special Regime of the reserve for investments in the Canary Islands (Law 19/1994) in the column "Anticipated investments considered materialisation of the RIC in this settlement", in the row corresponding to the RIC 2019, period in which the investment was made, for the amount that is considered materialised in 2019 because the RIC has been endowed,, i.e. 200 euros.

The amount invested in advance in the financial year 2019 is 1,000 euros, as RIC has been endowed in 2019 in the amount of 200 euros, remains to endow the RIC against the profits obtained until 31 December 2022 in the amount of 800 euros. In this case, company "C" must complete the table relating to Anticipated investments on page 22 of Form 200, specifically, it must complete the box "Anticipated investments 2019" in the column "Investments foreseen in letters B bis, C and D, art. 27.4 Law 19/1994", for the amount of 1,000 euros, as well as the column "Pending RIC endowment at the end of the period" in the row relating to "Anticipated investments 2019" for the amount of 800 euros.In addition, in 2019, must report the materialisation and its financing system together with the corporate income tax return.

Thus, the adjustment on page 13 and the table on page 22 of form 200 for the financial year 2019 shall be completed as follows:

Detail of corrections to the result of the P and G account (page 13 of Form 200)

Canary Islands investment reserve (Law 19/1994)

[00403]

---

[00404]

200

RICTo be materialised
RIC at the beginning
period
Implemented / materialised in this settlementTo be materialised
RIC at end of period
Planned investments
letters A and B, Art. 27.4 Law 19/1994
Planned investments
B bis, C and D, Art. 27.4 Law 19/1994
Anticipated investments
considered materialisation
of the RIC in this settlement
RIC 2019 --- --- --- 200 ---
Amount of the RIC endowment from 2019 profits
[00927] 200
Investments
anticipated
Pending
endow RIC
at the beginning of the period
Planned investments
letters A and B,
art. 27.4 Law 19/1994
Planned investments
letters B a, C and D,
art. 27.4 Law 19/1994
To be endowed
RIC at end of period
Anticipated investments 2019 --- --- 1,000 800

Financial year 2020:

Company "C" makes an allocation to the RIC of 600 euros out of this year's profits (it can do so because it complies with the limit, as 600 euros < 900,000 euros), so should enter an amount of 600 euros in the row "Amount of the RIC allocation out of 2020 profits" of the table "Special regime of the reserve for investments in the Canary Islands (Law 19/1994)" on page 22 of form 200.

In addition, should complete on page 13 of form 200, the box [00404] "Reserve for investments in the Canary Islands (Law 19/1994)" (negative adjustment) for the amount of 600 euros, as this is the value of the reduction in the taxable base for the financial year 2020 that was made due to the allocation to the RIC.

In the financial year 2020, company "C" does not make any investment, but shall be considered as realised in this financial year 2020 part of the investment made in 2019.Therefore, this company should fill in the first table on page 22 of Form 200 relating to the Special Regime of the reserve for investments in the Canary Islands (Law 19/1994) in the column "Anticipated investments considered materialisation of the RIC in this settlement", in the row corresponding to the RIC 2020, for the amount considered materialised in 2020 because the RIC has been endowed, i.e. 600 euros.

At the beginning of the financial year 2020, the RIC of 800 euros remains to be endowed, due to the anticipated investment made in the financial year 2019.For this reason, company "C" should complete the column "Pending RIC endowment at the beginning of the period" in the table relating to advance investments, in the row corresponding to the RIC 2019 for the amount of 800 euros.The amount invested in advance in the financial year 2019 was 1,000 euros and the RIC endowment in the financial year 2019 was 200 euros, in 2020 it is 600 euros, so at the end of the financial year 2020, the RIC endowment of 200 euros remains to be endowed.

Thus, the adjustment on page 13 and the table on page 22 of Form 200 for the financial year 2020 shall be completed as follows:

Detail of corrections to the result of the P and G account (page 13 of Form 200)

Canary Islands investment reserve (Law 19/1994)

[00403]

---

[00404]

600

RICTo be materialised
RIC at the beginning
period
Implemented / materialised in this settlementTo be materialised
RIC at end of period
Planned investments
letters A and B, Art. 27.4 Law 19/1994
Planned investments
B bis, C and D, Art. 27.4 Law 19/1994
Anticipated investments
considered materialisation
of the RIC in this settlement
RIC 2019 --- --- --- --- ---
RIC 2020 --- --- --- 600 ---
Amount of RIC endowment against 2020 profits
[00927] 600
Investments
anticipated
Pending
endow RIC
at the beginning of the period
Planned investments
letters A and B,
art. 27.4 Law 19/1994
Planned investments
letters B a, C and D,
art. 27.4 Law 19/1994
To be endowed
RIC at end of period
Anticipated investments 2019 800 --- --- 200
Anticipated investments 2020 --- --- --- ---

Financial year 2021:

Company "C" will make an allocation to the RIC of 800 euros out of this year's profits (it can do so because it complies with the limit, since 800 euros < 900,000 euros), so should enter an amount of 800 euros in the row "Amount of the RIC allocation 2021" of the table "Special regime of the reserve for investments in the Canary Islands (Law 19/1994)" on page 22 of form 200.

In addition, should complete on page 13 of form 200, the box [00404] "Reserve for investments in the Canary Islands (Law 19/1994)" (negative adjustment) for the amount of 800 euros, as this is the value of the reduction in the taxable base for the financial year 2021 that was made as a result of the allocation to the RIC.

In the financial year 2021 company "C" does not make any investments, but part of the investment made in 2019 shall be deemed to have been realised in this financial year 2021. Therefore, this company should fill in the first table on page 22 of Form 200 relating to the Special Regime of the reserve for investments in the Canary Islands (Law 19/1994) in the column "Anticipated investments considered materialisation of the RIC in this settlement", in the row corresponding to RIC 2021, for the amount that is considered materialised in 2021 because the RIC has been endowed, i.e. 200 euros.

Regarding the table relating to advance investments, at the beginning of the financial year 2021, the RIC is pending to be endowed in the amount of 200 euros, due to the advance investment made in the financial year 2019.For this reason, company "C" should complete the column "Pending RIC endowment at the beginning of the period", in the row corresponding to the RIC 2019 for the amount of 200 euros.

The amount invested in 2019 was 1,000 euros and the endowment to the RIC in 2019 was 200 euros, in 2020 600 euros and in 2021 800 euros, therefore, in the table relating to anticipated investments there is no RIC pending endowment for any amount, at the end of the financial year 2021.For this reason, company "C" should not complete the box "Pending endowment of RIC at the end of the period", in the row corresponding to RIC 2019.

However, in the financial year 2021, a total reserve of 800 euros will be set aside, of which 200 euros correspond to the realisation of anticipated investments made in the financial year 2019, so that an amount of 600 euros will remain to be realised in subsequent periods.For this reason, company "C" should complete, in the first table on page 22 of Form 200, the column "Pending materialisation of RIC at the end of the period", in the row corresponding to the RIC 2021 for the amount of 600 euros.

Detail of corrections to the result of the P and G account (page 13 of Form 200)

Canary Islands investment reserve (Law 19/1994)

[00403]

---

[00404]

800

RICTo be materialised
RIC at the beginning
period
Implemented / materialised in this settlementTo be materialised
RIC at end of period
Planned investments
letters A and B, Art. 27.4 Law 19/1994
Planned investments
B bis, C and D, Art. 27.4 Law 19/1994
Anticipated investments
considered materialisation
of the RIC in this settlement
RIC 2019 --- --- --- --- ---
RIC 2020 --- --- --- --- ---
RIC 2021 --- --- --- 200 600
Amount of the RIC allocation from 2021 profits
[00927] 800
Investments
anticipated
Pending
endow RIC
at the beginning of the period
Planned investments
letters A and B,
art. 27.4 Law 19/1994
Planned investments
letters B a, C and D,
art. 27.4 Law 19/1994
To be endowed
RIC at end of period
Anticipated investments 2019 200 --- --- 0
Anticipated investments 2020 --- --- --- ---
Anticipated investments 2021 --- --- --- ---