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Practical Handbook for Companies 2021

Canary Islands tax system

1.Deduction for investment in cinematographic production

With effect for tax periods beginning on or after 1 January 2021, the first final provision of Law 14/2021, of 11 October, amending Royal Decree-Law 17/2020, of 5 May, approving measures to support the cultural sector and tax measures to address the economic and social impact of COVID-2019, amends the fourteenth additional provision of Law 19/1994, of 6 July, amending the Canary Islands Economic and Fiscal Regime, to update the limits applicable to deductions for investments in film productions and audiovisual series made in the Canary Islands.

In this way, it is established that the amount of the deduction for investments in Spanish productions of feature and short films and fiction, animation or documentary audiovisual series regulated in article 36.1 of the LIS, may not exceed the result of increasing by 80 percent the maximum amount referred to in that article in the case of productions made in the Canary Islands.

Furthermore, it is established that the amount of the deduction for expenses incurred in Spanish territory for foreign productions of feature films or audiovisual works regulated in article 36.2 of the LIS, as well as the amount of the deduction for expenses incurred in the production and exhibition of live performing arts and musical shows referred to in article 36.3 of the LIS, may not exceed the result of increasing by 80 percent the maximum amount referred to in those articles in the case of expenses incurred in the Canary Islands.

2.Tax regime for ships and shipping companies in the Canary Islands

With effect for tax periods beginning on or after 1 January 2021 that have not ended on 11 July 2021, Law 11/2021, of 9 July, on measures to prevent and combat tax fraud, adds paragraph 3 to Article 73 of Law 19/1994, of 6 July, amending the Canary Islands Economic and Fiscal Regime, to establish that the vessels of shipping companies registered in the Special Register of Ships and Shipping Companies that are registered in another Member State of the European Union or the European Economic Area are also considered to be registered in the Special Register, provided that they comply with the requirements for registration that apply to other vessels.

On the other hand, Article 76 of Law 19/1994, of 6 July 1994, amending the Economic and Fiscal Regime of the Canary Islands, which regulates the rebates applicable to the full amount of Corporation Tax for shipping companies in the Canary Islands, is amended, introducing a limitation of these applicable rebates.To this end, it is established that when the part of the tax base resulting from activities closely related to maritime transport exceeds the part of the tax base resulting from the activities that give rise to the right to apply the special scheme, the tax liability corresponding to this excess cannot be subject to a rebate.This limitation shall apply in respect of each vessel whose operation gives rise to entitlement to the bonus.

Finally, Article 76 of Law 19/1994, of 6 July, adds that the tax losses derived from the activities that generate the right to the application of the special regime for ships and shipping companies in the Canary Islands, may not be offset against tax losses derived from the rest of the entity's activities, either in the current financial year or in subsequent years.