Deduction for the acquisition of new fixed assets

1. Requirements

In order to apply the deduction for the acquisition of fixed assets, it is necessary:

• That investments be made in the Canary Islands in new tangible fixed assets , excluding land, affected by the development of the entity's business activity.

  For these purposes, the following appraised categories are considered fixed assets:

  • Buildings and other constructions located in Spain.

  • Machinery, facilities and tools.

  • Internal and external transport elements, excluding vehicles that may be used by persons directly or indirectly linked to the entity.

  • Furniture and belongings.

  • Information processing equipment.

  • Mining research.

• the amounts invested recorded as fixed assets, except for those relating to concepts that are in the nature of current expenses.

• That the elements remain in operation in the company of the same taxpayer for at least 5 years or during its useful life, if less, without being transferred, leased or assigned to third parties for their use.

This deduction may be enjoyed by taxpayers who, through an economic operation , engage in the leasing or transfer of fixed assets to third parties for their use, provided that they meet the requirements set forth in the preceding paragraphs and there is no direct or indirect link with the lessees or transferees of said assets, nor are they financial leasing operations.

This deduction may also be applied to movable assets acquired under a financial leasing arrangement that have a depreciation coefficient equal to or greater than 10% indicated in the amortization tables approved by the Order of May 12, 1993. In this case, the applicable deduction percentage, which in no case will be higher than that established in general terms, will be calculated by multiplying the aforementioned general percentage by the result of the quotient formed by:

• In the numerator, the effective term in months of the financial leasing operation.

• In the denominator, the minimum period in months that, in accordance with the tax regulations in force at the time of signing the contract, the asset acquired under a financial leasing regime could be amortized.

The same investment not give rise to the application of the deduction in more than one entity .

2. Deduction base

The basis for the deduction will be the total amount of the agreed consideration excluding interest, indirect state taxes and their surcharges, which will not be included in the deduction, regardless of their consideration for purposes of the valuation of the assets.

3. Computation of the deduction

Investments in tangible fixed assets that give the right to apply this deduction will be deemed to have been made in the tax period in which they come into operation .

When the period elapsed between the firm order of the goods and the effective receipt by the entity is greater than years, the deduction may computed in the tax the payments are made for the corresponding part. This rule will also apply when the payment period for the investment is longer than two years.

4. Percentages

The deduction for the acquisition of new fixed assets continues to apply in the Canary Islands in accordance with the Deduction Regime established in article 26 of Law 61/1978, of December 27, in its latest version given by article 74 of Law 19/1994, of December 30, with the specialties introduced by article 94 of Law 20/1991.

Therefore, the deduction percentage of 5 percent established in article 26 of Law 61/1978, of December 27, may be increased in accordance with article 94.1.a) of Law 20/1991 . This article indicates that the rates applicable to investments made will be 80% higher than those of the general regime, with a minimum differential of 20 percentage points. In the case of this deduction, the percentage to be applied will be 25 percent , since it is the highest of the following two percentages:

• 5% x 1.8 = 9%
• 5% + 20% = 25%

5. Applicable limits

In the same way that the percentages are increased, the limits ## applicable to this deduction will also be increased in accordance with article 94.1. b) of Law 20/1991.

The deduction for investments in new fixed assets in the Canary Islands from both previous tax periods and tax period subject to declaration is subject to a joint limit of 35 percent of the net tax rate.

Therefore, the joint limit of 35 percent in accordance with the provisions of Section Seven of Article 26 of Law 61/1978 and in Article 94.1. b) of Law 20/1991 for the case of the deduction for investments in new fixed assets in the Canary Islands that comes from both previous tax periods and the tax period subject to declaration, will be increased to 70 percent, since it is the greater of the following two:

• 35% x 1.8 = 63%
• 35% + 35% = 70%