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Practical Handbook for Companies 2021

Common rules on deductions to encourage certain activities

Regulation: Article 39 LIS.

The following common provisions are established for the deductions provided for in Chapter IV of Title VI of the LIS:

  • These deductions will be applied once the deductions and allowances of Chapters II and III of Title VI of the LIS have been made.

    A tener en cuenta:

    When applying the deductions for investments for the year established in the Corporate Tax Act, and the outstanding balances of deductions regulated in previous Corporate Tax Acts, in the different General State Budget Acts or in laws establishing specific regimes, the order set out in section 1 of transitory provision twenty-four point one of the CTA or article 39.1 must be taken into account.

    Deductions for investments will be applied once the deductions and allowances in Chapters II and III of Title VI of the CTA have been applied, as well as any deductions to avoid double taxation pending application, which could be regulated in the laws regulating corporate tax prior to the CTA.

  • The amounts corresponding to the tax period not deducted may be applied in the assessments for the tax periods ending in the next and subsequent 15 years.

    However, the amounts corresponding to the deduction for research and development and technological innovation activities provided for in Article 35 of the LIS, may be applied in the tax returns for the tax periods ending in the immediate and subsequent 18 years.

    A tener en cuenta:

    The provisions of this point shall also apply to deductions under the regime of Article 27.3 First of Law 49/2002, generated in 2021 and which have not been deducted in the current tax return.

  • The computation of the time limits for the application of the deductions may be deferred until the first financial year in which, within the limitation period, positive results occur, in the following cases.

    • In the newly-created entities.

    • In the institutions which reorganise losses in previous years through the contribution effective new resources, without which it is considered as such the application or capitalisation reserve.

  • The amount of the deductions provided for in Chapter IV of Title VI of the LIS, applied in the tax period, together may not exceed 25 per cent of the gross tax liability less deductions to avoid double taxation and allowances.However, the limit will be raised to 50 per cent when the amount of the deduction provided for in articles 35 and 36 of the LIS, corresponding to expenses and investments made in the tax period itself, exceeds 10 per cent of the gross tax liability, less deductions for the avoidance of double international taxation and allowances.

    A tener en cuenta:

    This joint limit applies to all the deductions listed in the table "Deductions to encourage certain activities (Cap. IV.Tit. VI, DT 24ª.3 LIS and art. 27.3 primero Ley 49/2002)" on pages 17 and 18 of form 200.

  • The same investment may not give rise to the application of more than one deduction in the same entity unless expressly provided for, nor may it give rise to the application of a deduction in more than one entity.

  • The assets subject to the deductions provided for in this chapter to which this section refers, must remain in operation for 5 years, or 3 years, in the case of movable assets, or for their useful life if shorter.

    In the case of film productions and audiovisual series, this requirement shall be deemed to be fulfilled to the extent that the production company maintains the same percentage of ownership of the work during the period of 3 years, without prejudice to its right to market all or part of the exploitation rights derived from the work to one or more third parties.

    Together with the tax liability corresponding to the tax period in which the breach of this requirement will pay the reduced amount along with, in addition to interest on arrears.

  • The Administration's right to initiate the procedure for checking the deductions provided for in this Chapter applied or pending application shall expire after 10 years from the day following the day on which the deadline for filing the tax return or self-assessment corresponding to the tax period in which the right to their application arose.

    Once this period has elapsed, the taxpayer must accredit the deductions he/she intends to apply, by showing the tax assessment or self-assessment and the accounts, with proof of their deposit during the aforementioned period at the Companies Registry.