Deductions to encourage certain activities

Companies that hire their first employee via an indefinite contract, in support of entrepreneurs, as defined in article 4 of Act 3/2012 on urgent reform measures for the labour market, can deduct 3,000 euros from the gross tax charge, provided the employee is under the age of 30.

This deduction will be subject to maintaining this work relationship for at least 3 years from the start date. Likewise, the contracted employee that gives rise to this deduction will not be calculated for the purposes of increasing staff, established in article 102 of the Spanish Corporation Tax Act, i.e., for the purposes of increasing staff to apply the tax incentive for the freedom of amortisation corresponding with small-sized enterprises.

In the case of part-time contracts, the deduction shall apply proportionally to the working hours agreed in the contract.

With effect for tax periods beginning on or after 7 November 2018, those 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 in accordance with the requirements indicated, increasing them by 30 percent.

Organisations with a workforce of fewer than 50 employees agreeing permanent employment contracts for support to entrepreneurs, defined in article 4 of the Urgent Labour Market Reform Measures Act 3/2012 with unemployed people benefiting from contributive unemployment benefit governed by Title III of the Reformed Text of the General Social Security Act may deduct 50% of the lowest of the following sums from the full contribution:

1. The amount of unemployment benefit the worker has yet to receive when he/she is hired.
2. The amount corresponding to 12 monthly payments of the unemployment benefit acknowledged for him/her.

This deduction shall apply with respect to contracts made during the tax period before a staff of 50 workers is reached, provided that, in the 12 months following the beginning of the employment relationship, there is, for each worker, an increase of at least one unit in the organisation's total average workforce with respect to that existing in the previous 12 months.

The application of this deduction shall depend on the worker hired having received the unemployment benefit for at least 3 months before the start of the employment relationship. For these purposes, the worker shall provide the organisation with a State Employment Public Service certificate relating to the sum of benefit still to be received on the scheduled date for the beginning of the employment relationship.

This deduction shall also depend on this employment relationship being maintained for at least 3 years from its start date.

In the case of part-time contracts, the deduction shall apply proportionally to the working hours agreed in the contract.

In addition, the contracted worker giving rise to the right to this deduction shall not be counted for the purposes of increases in the workforce established in article 102 of the Companies Tax Act; that is, for the purposes of the increase in the workforce for applying the tax incentives corresponding to small businesses.

With effect for tax periods beginning on or after 7 November 2018, those 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 in accordance with the requirements indicated, increasing them by 30 percent.

The deductions established in sections 1 and 2 of article 37 of the Corporation Tax Act (deduction for hiring the first worker aged under 30 and for hiring disabled people if the workforce is less than 50 employees), shall be applied to the full contribution for the tax period corresponding to the completion of the trial period of one year required in the corresponding type of contract.

These deductions shall depend on this employment relationship being maintained for at least 3 years from its start date.

Breach of any of the requirements indicated in article 37 of the Corporation Tax Act shall result in the loss of the deduction for job creation. This shall be corrected in the manner established in article 125.3 of the Companies Tax Act. In other words, the taxpayer will have to pay, together with the contribution for the tax period in which the breach of the requirements of conditions has taken place, the sum deducted corresponding to the deduction applied in previous periods, plus late payment interest.

However, the obligation to maintain employment shall not be understood to have been breached when the employment contract is terminated after the trial period has elapsed; for objective reasons or due to disciplinary dismissal when either of these is declared or acknowledged to be reasonable; or the resignation, death, retirement or total permanent disability or serious illness of the worker.