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Practical Manual for Companies 2024.

Special tax regime of the Balearic Islands

With effects for thetax periods beginning between January 1, 2023, and December 31, 2028, Royal Decree 710/2024, of July 23, approves the Regulation for the development of the special tax regime of the Balearic Islands regulated by Law 31/2022, of December 23.

As for the regulatory development of the Reserve for Investments in the Balearic Islands, We highlight the following new features:

  • Some are established general rules to specify which taxpayers are eligible for the reserve, the requirements that establishments located in the Balearic Islands must meet, and what benefits the reserve can provide.

  • The particularities and the specific requirements that must meet certain requirements investments in which you can materialize the reservation for investments in the Balearic Islands.

  • They are introduced special rules for the calculation of deadlines of the materialization of the investment. Of note is the one that establishes that the maximum period for the materialization of investments will not be affected due to the fact that such materialization may take place after December 31, 2028, provided that the allocation or allocations to the reserve for investments in the Balearic Islands linked to such investments have been made in the tax periods beginning between January 1, 2023, and December 31, 2028.

  • They are established specific rules for the determination of the amount of the investment materialization and its allocation to the reserve allocation(s).

In relation to the regulatory development of the Special regime for industrial, agricultural, livestock and fishing companies, we highlight the following new features:

  • A series of are introduced particularities for fishing and shipbuilding activities.

  • It is established that will not be part of the performance on which the bonus can be applied subsidies and aid, unless these must be passed on to the end user in the sales price of the product.

Furthermore, with the indicated effects, the person in charge of the Ministry of Finance is authorized to determine the information that must be provided by taxpayers who apply the investment reserve in the Balearic Islands provided for in section four of the Seventieth Additional Provision of Law 31/2022, of December 23, along with the statement for Corporate Tax, which will consist at least of:

  • Correction to the result from the profit and loss account as a reserve for investments in the Balearic Islands.

  • Amount of the endowment to the reserve for investments in the Balearic Islands charged to profits from the financial year.

  • Amounts applied/materialized in the settlement of the fiscal year, indicating, for each of the five financial years prior to said financial year, the amounts pending materialization of the reserve at the beginning of the period, the planned investments, the anticipated investments considered to be materialization of the investment reserve in the liquidation of the financial year and the amounts pending materialization at the end of the period.

  • Amounts of advance investments from the previous five years, indicating, for each of them, the amounts pending to be allocated to the reserve at the beginning and end of the period.

    Likewise, the regulatory development states that the special tax regime of the Balearic Islands must in all cases respect the quantitative limits established in the European Union regulations on de minimis aid, and may be combined with other de minimis aid and with State aid compatible with the internal market. At the same time, the following are regulated: monitoring and control powers of the State Tax Administration, as well as the information obligations linked to the aforementioned aid.

    Regarding the obligation to provide information In terms of aid, the Order HAC/1031/2024, of September 25, has approved the model 283 "Annual information declaration of aid received under the Special Tax Regime of the Balearic Islands" to be submitted by taxpayers who have received aid obtained under all the incentives applicable under the Special Tax Regime of the Balearic Islands.

    The submission of this information statement which is annual, for taxpayers of Corporate Tax and Non-Resident Income Tax with a permanent establishment, will be carried out within the deadline for filing the Corporate Tax return.

    You can consult the particularities of this special regime in the Chapter 13of this Practical Manual.