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Practical Manual for Companies 2024.

B. Allocations to the reserve

Regulation:  DA 70. Four.2 Law 31/2022; Article 4 DR 710/2024

The reduction It will be applied to the provisions made in each tax period to the investment reserve up to the 90 percent limit from the portion of profit obtained in the same period that is not subject to distribution, as long as it comes from establishments located in the Balearic Islands.

The application of the reduction may not determine that the tax base is negative.

For these purposes, the following will be considered: profits from establishments located in the Balearic Islandsthose derived from economic activities, including those arising from the transfer of assets related to them. Specifically, those derived from operations carried out with the personal and material resources assigned to said establishment that close a commercial cycle that determines economic results.

In this sense, they will be considered as retained earnings those intended to fill the reserves, excluding those of a legal nature.

In addition, will not be considered undistributed profit:

  • The one intended to feed legal reserves.

  • That which derives from the transfer of assets whose acquisition would have determined the materialization of the reserve for investments in the Balearic Islands.

    However, in cases of transfer of assets that have only been partially used to materialize the reserve, the undistributed profit will be considered to be the proportional part of said profit that corresponds to the part of the acquisition value of the asset that would not have resulted in the materialization of the reserve.

  • That which derives from the securities representing participation in the capital or equity of other entities, as well as the transfer of equity to third parties.

Allocations to reserves will be considered decreased by the amount that would have been eventually deducted from equity, either in the year to which the reduction in the tax base refers or in the year in which the agreement to make the aforementioned allocations was adopted.