New regulations for 2024

Main tax changes introduced by Royal Decree 710/2024, of July 23, approving the Regulations for the development of the special tax regime of the Balearic Islands

CORPORATION TAX

The rules contained in this Regulation will take effect for the tax periods beginning between January 1, 2023 and December 31, 2028 .

The special tax regime of the Balearic Islands be understood as the reserve for investments in the Balearic Islands and the special regime for industrial, agricultural, livestock and fishing companies , provided for in the Seventieth Additional Provision of Law 31/2022, of December 23, on the General State Budget for the year 2023.

RESERVE FOR INVESTMENTS IN THE BALEARIC ISLANDS

• General rules

  • The reserve for investments in the Balearic Islands is applicable to taxpayers of Corporate Tax and Personal Income Tax, with respect to income obtained through establishments located in the Balearic Islands whether or not they have their tax domicile in the Balearic Islands.

  • shall be understood to be those that meet the requirements set forth in article 22.3 of Law 27/2014, of November 27, on Corporate Tax, in the event that are located in the Balearic Islands . In any case, an establishment will be deemed to be located in the territory of the Balearic Islands when it is in its territorial waters up to the outer limit of the territorial sea, in accordance with Law 10/1977, of January 4, on territorial sea.

  • Profits from establishments located in the Balearic Islands will be considered to be those derived from operations carried out with the personal and material means assigned to them that close a commercial cycle that determines economic results. The following will not be considered undistributed profit:

    1. The one intended to feed legal reserves.

    2. 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.

    3. 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.

  • For the determination of the undistributed profit and for the application of the percentage limit the same that may be allocated to the reserve for investments in the Balearic Islands the accounting result will be considered.

• Investments in which the reserve for investments in the Balearic Islands can be materialized

  • Assets of tangible or intangible fixed assets. Assets of tangible or intangible fixed assets shall be understood as those items to which the corresponding registration and valuation rules issued in development of the General Accounting Plan refer. Assets may be new or used, provided that, in the case of the latter, said assets have not formed part, in their entirety, of the materialization of the reserve for investments in the Balearic Islands with respect to another taxpayer.

  • Specific features are established for investments in land, defining what is understood by commercial areas subject to a rehabilitation process, tourist activities and tourist establishments, for the purposes of the reservation for investments in the Balearic Islands.

  • rules on investments in intangible fixed assets are indicated by indicating that the will be considered non-patented technical know-how: the rights for the economic exploitation of secret formulas or procedures, the rights over information relating to industrial, commercial or scientific experiences and the undisclosed set of technical information necessary for the industrial reproduction, directly and under the same conditions, of a product or a procedure.

  • It is detailed which investments will be considered as investments in heritage elements that contribute to the improvement and protection of the environment in the territory of the Balearic Islands.

  • It is indicated that expenses derived from research, development and technological innovation activities referred to in article 35 of Law 27/2014, of November 27, on Corporate Income Tax will be considered as research and development expenses

  • The reserve for investments in the Balearic Islands may be materialized in any type of transport element related to economic activity , whether for internal or external use, defining when it will be understood that a vehicle, a vessel intended for maritime passenger transport or elements of passenger transport by road are suitable for the materialization of the reserve for investments .

• Specific requirements that certain investments must meet

  • Investments in aircraft contribute to improving connections between the Balearic Islands.

    The aircraft in which the investment reserve is materialized will be considered to contribute to improving the connections of the Balearic Islands when more than fifty percent of their flights are intended to provide transport services between the islands of the Balearic archipelago or between these and other territories during the maintenance period of the investment.

    When this volume of flights is not reached, the reservation will be considered to have been materialized in the amount of the investment in the aircraft that corresponds to the percentage represented by the flights between the islands of the archipelago or between these and other territories with respect to the total of their flights during the investment maintenance period.

  • The administrative authorisation for the circulation of tourist vehicles intended for vehicle rental with or without driver and, in general, for all vehicles subject to the Tax on Mechanical Traction Vehicles must include an address corresponding to a municipality in the Balearic Islands . Likewise, when vehicles do not require administrative authorisation for their circulation because they are intended for internal use in the company's facilities, they will be required to be intended for use in establishments located in the Balearic Islands. 

  • With regard to the maritime transport elements , it will be required in all cases that they are vessels with a Spanish flag and with a home port in the Balearic Islands.

  • Specific rules are established regarding the subscription of shares or participations:

    1. The investments made by the participating company will not give rise to the application of any other tax benefit under the terms of number 11 of section four of the Seventieth Additional Provision of Law 31/2022, of December 23.

    2. For the full application of the reduction for the reserve for investments , the amount of the acquisition value of the investments made by the participating company must reach, as a minimum, the amount paid of the shares or participations acquired by the taxpayer. Otherwise, the reduction in the tax base will be proportional to the investment made. The participating company will be deemed to carry out its activity in the territory of the Balearic Islands when its tax domicile is located in said territory or it has an establishment.

    3. The materialization of the investment by the subscriber person or entity will be considered to have occurred with the successive disbursement or disbursements of the subscribed capital due to the corresponding monetary contribution. For its part, the investments made by the participating entity must materialize in any case after the constitution or increase of the capital ly within the period established in letter C of section four.4 of the Seventieth Additional Provision of Law 31/2022, of December 23.

    4. The investment will be deemed to have materialized the investee on the date on which the acquired assets come into operation .

    5. The materialization of the reserve for investments in the Balearic Islands may be carried out through the acquisition of shares in temporary business associations regulated by Law 18/1982, of May 26, on the tax regime of groups and temporary business associations and regional industrial development companies.

  • The real estate intended for leasing must be used for one of the following activities:

    1. To the leases of protected housing by the entity promoting them. The must be leased for at least uninterrupted years.

    2. To the tourist activities referred to in Law 8/2012, of July 19, on Tourism in the Balearic Islands.

    3. For the development of the industrial activities included in divisions 1 to 4 of the first section of the rates of the Tax on Economic Activities, approved by Royal Legislative Decree 1175/1990, of September 28.

    4. At social-health activities, residential centers for the elderly, geriatric centers and neurological and physical rehabilitation centers. Pharmacies will be understood to constitute social-health activities.

    5. To the development of activities in commercial zones located in areas where the tourist offer is in decline. The area whose tourist offer is in decline shall be understood as the saturated or mature tourist areas declared as such in accordance with Law 8/2012, of July 19, on Tourism in the Balearic Islands.

    The regime will be applicable to the exploitation of properties by tourist entrepreneurs under a timeshare regime .

  • Investments in land affected by industrial activities. Land will be considered to be used for the development of industrial activities when used in any of the economic activities of the taxpayer when these are included in divisions 1 to 4 of the first section of the rates of the Tax on Economic Activities , approved by Royal Legislative Decree 1175/1990, of September 28, considering in particular that such industrial activities are carried out in buildings, constructions and installations, as well as on covered or uncovered surfaces, which are used for the storage of raw materials, production and transportation elements, finished and semi-finished products, as well as administrative premises, those intended for the use of personnel and those intended for manufacturing activities, and those where the machinery, installations, and elements required or convenient for safety and hygiene at work are located.

  • Computer applications and industrial property . The exclusivity requirement referred to in point 4 of number 5 of section four of Additional Provision Seventieth of Law 31/2022, of December 23, shall not be deemed to have been breached in cases of non-exclusive transfer of the corresponding exploitation rights, in the terms provided for in the consolidated text of the Intellectual Property Law, approved by Royal Legislative Decree 1/1996, of April 12, which do not affect the full application of such computer applications or works subject to intellectual property to the economic activity of the transferor or other non-exclusive assignees in the territory of the Balearic Islands.

    For the purposes of the reservation for investments in the Balearic Islands, computer applications shall be understood to mean the computer programs referred to in Title VII of Book One of the aforementioned consolidated text of the Intellectual Property Law .

  • Special rules for calculating the time periods for investment materialization:

    • The maximum period for the materialisation of investments will not be affected by the fact that said materialisation may take place after 31 December 2028 , provided that the allocation or allocations of the reserve for investments in the Balearic Islands linked to such investments have been made in the tax periods commencing between 1 January 2023 and 31 December 2028.

    • In the case of acquisition of assets through financial leasing , it will be understood that the materialization occurs at the time when they come into operation , without prejudice to the fact that, if the purchase option is not finally exercised, the taxpayer must regularize the tax benefit.

  • Specific rules for determining the amount of the materialization of the investment and its allocation to the reserve allocation(s):

    • In the case of creation of jobs , the materialization will be considered to have occurred only during the first two years since the increase in staff occurs and will be computed, in each tax period, at the amount of the average cost of gross salaries and mandatory social contributions that correspond to said increase. 

    • In cases where the amount of the investment materialization can be allocated to various provisions to the investment reserve corresponding to different financial years , it shall be understood that said allocation is made first to the first available provision and, once this has been exhausted, to the next available provision, and so on until the last provision susceptible of allocation is exhausted in whole or in part.

REGIME SPECIAL FOR INDUSTRIAL, AGRICULTURAL, LIVESTOCK AND FISHING

Taxpayers of Corporate Tax and Non-Resident Income Tax will apply a 10% bonus on the full amount corresponding to the income derived from the sale of tangible goods produced in the Balearic Islands by themselves, typical of agricultural, livestock, industrial and fishing activities , in the latter case in relation to catches made in their fishing and aquaculture area. Those persons or entities domiciled in the Balearic Islands or in other territories that are dedicated to the production of such goods in the archipelago, through a branch or permanent establishment, may benefit from this bonus.

The following particularities are established:

• Fishing activities eligible for bonuses

  It will be necessary that deep-sea fishing be landed in the Balearic ports and handled or transformed in the archipelago.

• Shipbuilding activities

• Grants or aids

  Subsidies and aid will not form part of the performance to which the bonus may be applied, they must be passed on in the sale price of the product to the end user.

por el que se aprueba el Reglamento de desarrollo del Régimen fiscal especial de las Illes Balears.(BOE, 24-julio-2024)