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3. Special regimes of certain Autonomous Communities


3. SPECIAL REGIMES OF CERTAIN AUTONOMOUS COMMUNITIES

3.1. Canary Islands tax regime

The Canary Islands enjoy tax benefits intended to compensate for the disadvantages brought about by insularity and distance from the Spanish mainland and the main goal of which is to attract investments to the Canary Islands.

That regime has been renewed for the period 2015 to 2010 through the approval of Royal Decree-Law 15/2014, of December 19, amending the Canary Islands Economic and Tax Regime, including some improvements in relation to the former regime which mainly affect the regulation of the Canary Islands Investment Reserve (RIC) and the Canary Islands Special Zone.

A major change resulting from the authorities' new approach in relation to State aid, is the discontinuation of the system for notification and subsequent authorization by the EU, which has been replaced by a mechanism to adapt the incentives included in the Canary Islands tax regime as a whole to Community legislation.

The regime is basically as follows:

3.1.1. Direct Taxation

  • There is a reduction of 50% of the portion of gross tax payable that relates to income from the sale of tangible goods specific to agricultural, livestock farming, industrial or fishing activities, provided that they have been produced by the taxpayer itself in the archipelago.
  • The tax credit for investment in fixed assets consisting of 25% of the investment up to a limit of 50% of tax payable net of tax reductions and double taxation credits remains in force.
  • The tax credits rates for investments made in the Canary Islands are higher than those applicable to investments in the Spanish mainland.
  • The taxable amount is reduced (by up to 90% of undistributed income per books for the year) by amounts recorded to a special reserve (RIC): the RIC must be invested within a period of up to three years. The RIC and can be invested in certain investments (to create or expand establishments, acquire certain assets, including the subscription of shares or other securities); these investments must be related (according to the requirements which are expressly regulated) with activities or entities/establishments in the Canary Islands.
  • In addition, two new tax credits have been created for entities domiciled in the Canary Islands (with an average workforce of 50 employees and revenues below €10 million):
  1. Tax credit for investments in territories of western Africa (Morocco, Mauritania, Senegal, Gambia, Guinea-Bissau and Cape Verde).

Guide to business in Spain

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