Special tax regime of the Balearic Islands
If you are a resident of the Balearic Islands you should read this
Reserve for investments in the Balearic Islands
1. Taxpayers of the Corporate Tax and the Non-Resident Income Tax will have the right to a reduction in the tax base of the amounts that, in relation to their establishments located in the Balearic Islands, they allocate from their profits to the investment reserve in accordance with the provisions of this section.
2. Reduction will be applied to the allocations made to the investment reserve in each tax period up to the limit of 90% of the portion of profit obtained in the same period that is not subject to distribution, insofar as it comes from establishments located in the Balearic Islands.
In no case may the application of the reduction determine that the tax base is negative.
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4. The amounts allocated to the reserve for investments in the Balearic Islands must be materialized within a maximum period of three years counted from the date of accrual of the tax corresponding to the year in which it was provided, in the realization of any the investments indicated in this number.
5. The assets in which the investment is materialized must be located or received in the Balearic archipelago, used therein, affected and necessary for the development of economic activities of the taxpayer , except in the case of those that contribute to the improvement and protection of the environment in the Balearic territory.
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10. The taxpayers referred to in this section may make advance investments, which will be considered as materialization of the investment reserve that is provided from profits obtained in the tax period in which the investment is made or in the three subsequent periods, provided that the remaining requirements demanded in the same are met.
The materialization and its financing system will be communicated jointly with the declaration of the Corporate Tax, the Non-Resident Income Tax or the Personal Income Tax of the tax period in which the advance investments are made .
11. The application of the benefit of the investment reserve will be incompatible , for the same assets and expenses, with the deductions to encourage the performance of certain activities regulated in Chapter IV of Title VI of Law 27/2014, of November 27, on Corporate Income Tax. It will also be incompatible for the same goods and expenses with any tax benefit or measure of a different nature that has the status of state aid under European Union law, if said accumulation exceeds the limits established in the Community legislation that, in each case, are applicable.
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13. Personal Income Tax payers who determine their net income using the direct estimation method will be entitled to a deduction in the total tax for the net operating income that is allocated to the investment reserve , provided that these come from economic activities carried out through establishments located in the Balearic Islands.
In order to benefit from the reserve for investments in the Balearic Islands, natural persons must keep accounting records in the manner required by the Commercial Code and its implementing regulations from the year in which the profits that are intended to provide the reserve for investments in the Balearic Islands were obtained until the year in which the assets that are the object of the investment must remain in operation.
The deduction will be calculated by applying the average tax rate to the annual allocations to the reserve and will have a limit of 80% of the part of the full quota that proportionally corresponds to the amount of net operating income from establishments located in the Balearic Islands, provided that the limits established in the Community regulations that are applicable in each case are not exceeded.