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Practical Manual for Companies 2024.

Canary Islands tax system

With effect for tax periods beginning on or after January 1, 2024, Royal Decree-Law 8/2023, of December 27, modifies the time limits of the Reserve for investments in the Canary Islands and the Canary Islands Special Zone under the following terms:

  • As for the Reserve for investments in the Canary Islands, section 11 of article 27 of Law 19/1994, of July 6, is modified, eliminating the time limit that prevented carrying out in relation to the early investments, provisions charged to profits obtained after December 31, 2023.

    In this way, It is permitted to make contributions from profits obtained within the period of validity of the Regulation (EU) Commission Regulation (EC) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty, as set out in Article 59 thereof, i.e., until December 31, 2026, or as long as the period of validity of the standard that replaces it is respected. 

  • In relation to the Canary Islands Special Zone, Article 29 of Law 19/1994, of July 6, is amended, eliminating the time limits established regarding:

    • The validity of tax incentives planned for the entities of the ZEC in Title V of Law 19/1994, of July 6, establishing that they may be enjoyed during the six years immediately following the end of the validity of Regulation (EU) 651/2014, that is, until January 31, 2032, or that of the standard that replaces it. 

    • He Period for authorizing registration in the Official Registry of Entities of the ZEC will be limited to the date of expiry of the validity of Regulation (EU) 651/2014 established in its article 59, that is, until December 31, 2026, or that of the standard that replaces it. 

On the other hand, in relation to the limits applicable to the deduction for investments in fixed assets made in the Canary Islands, According to the interpretative criteria issued by the Supreme Court in several Sentences (among them, STS 3486/2005 and STS 744/2009), the joint limit 70 percent (80 percent for the islands of La Palma, La Gomera and El Hierro) applicable to the deduction generated in the tax period subject to declaration, only operates in cases where it concurs with deductions for investments in fixed assets in the Canary Islands generated in previous tax periods.

You can consult the application specialties of this joint limit in the following paragraph.