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.

  According to the provisions of article 214 of Royal Decree 2631/1982, of October 15, which approved the Corporate Income Tax Regulations regulated by Law 61/1978, the following are considered fixed assets: assessed categories:

  • 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 is also allowed to be applied to the movable property acquired under a financial lease which have an amortization coefficient equal to or greater than 10 percent 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 special features 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.

He Section Seven of the Article 26 of Law 61/1978, establishes that the deduction for investments in new fixed assets in the Canary Islands for the tax period being declared is subject to a joint limit of 35 percent of the net tax, which only applies in cases where it concurs with deductions for investments in new fixed assets in the Canary Islands from previous tax periods.

For these purposes, the following must be taken into account: interpretive criterion issued by the Supreme Court in several Judgments (among them, STS 3486/2005 and STS 744/2009):

• He joint limit only applies in the case that deductions from previous tax periods are present together with the deductions from the tax period being declared as follows:

  • First of all, the following will be taken into account: deductions for investments from previous tax periods which will be subject to the limit on the net quota established in their respective standards, with the accumulation of limits proceeding when several deductions from previous tax periods occur.

  • In second place, if the limit of previous tax periods is higher than the joint limit and if said joint limit is fully absorbed by investments from previous tax periods, the deduction that may correspond to the tax period being declared cannot be applied. On the contrary, if it were lower, the deduction may be made for investments in the tax period being declared up to the limit resulting from the difference between the limit for deductions from previous tax periods and the joint limit.

• If in the period subject to declaration there are only deductions for investments from previous tax periods, each of them will have its own limit, as established by their respective regulations, there being no legal prohibition that prevents the sum of the limits from absorbing 100 percent of the net amount, as established by the Supreme Court in the sixth legal basis of STS 744/2009, of January 29, 2009.