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Practical Manual for Companies 2023.

Deduction for the creation of employment

Regulation: Articles 37 LIS and 94 Law 20/1991

Note:

With effect for the tax periods beginning on January 1, 2019, the sole repealing provision of Royal Decree-Law 28/2018, of December 28, for the revaluation of public pensions and other urgent measures in social, labor and employment matters, repeals article 4 of Law 3/2012, of July 6, on Urgent Measures for the Reform of the Labor Market, which established the possibility of entering into open-ended employment contracts to support entrepreneurs.

However, the sixth transitional provision of the aforementioned Royal Decree-Law 28/2018 establishes that indefinite-term employment contracts to support entrepreneurs signed before January 1, 2019, are considered valid and will continue to be governed by the regulations in force at the time of their signing, as well as, where applicable, the corresponding incentives.

Therefore, the contracts signed during 2018 will generate the right to apply the deduction for job creation of article 37 of the LIS. This deduction, as provided for in article 37 of the LIS, will be applied to the full amount of the tax period corresponding to the end of the one-year trial period required in the corresponding type of contract.

Consequently, for contracts validly entered into between November 7, 2018 and December 31, 2018, whose trial period ends in one year, this increased deduction for job creation may be applied in fiscal year 2019 , in the event that the tax period coincides with the calendar year.

Regarding fiscal year 2020 , the right to apply this increased deduction cannot be generated, since as of January 1, 2019 this type of contract cannot be signed.

  • With effect for tax periods beginning on or after November 7, 2018, Article 94 bis of Law 20/1991, of June 7, establishes that entities that hire a worker to carry out their activity in the Canary Islands will be entitled to enjoy the tax benefits established by tax regulations for job creation, increasing them by 30 percent. Therefore, said increase will be applied to the deduction for job creation of article 37 of the LIS as follows:

    • Job creation by hiring people under 30 years of age: 3,900 euros (3,000 euros x 1.3) for hiring the first worker through an open-ended contract to support entrepreneurs, who is under 30 years of age.

    • Job creation by hiring unemployed people with unemployment benefits: 65 percent (50 percent x 1.3) of the lowest of the amounts specified in letters a) and b) of article 37.2 of the LIS.

  • The increased percentages article 94.1 a) of Law 20/1991 will not apply to this deduction ##1##, since this deduction is not equivalent to any of the deductions regulated in Law 61/1978.

    For this same reason, the increased limits of article 94.1 b) of Law 20/1991 will not apply to this deduction ##.