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Practical manual for Income Tax 2020.

c) Investments where the amounts destined for the RIC must be materialized

Regulations: Art. 27.4 Law 19/1994, of July 6, amending the Economic and Fiscal Regime of the Canary Islands

The amounts allocated to the investment reserve in the Canary Islands must be invested in one of the following investments:

  • Article 27.4.A: Initial investments consisting of, among others, the acquisition of new tangible or intangible fixed assets as a result of:

    - The creation of an establishment.

    - The expansion of an establishment.

    - The diversification of an establishment's activity for the production of new products.

    - The substantial transformation in the production process of an establishment.

    Under no circumstances may the reserve for investments in the Canary Islands be used to purchase properties intended for tourist purposes.

    Investments in land, whether built or not, are also considered initial investments, provided that they meet the requirements established in the aforementioned legal provision.

    In the case of taxpayers who meet the conditions of article 101 of Law 27/2014, of November 27, on Corporation Tax to be considered small entities, in the tax period in which the profit against which the reserve is provided is obtained, the investment may consist of the acquisition of used fixed assets, provided that the assets acquired have not previously benefited from the reserve regime for investments in the Canary Islands. In the case of land, the conditions provided for in this letter A of article 27.4 of Law 19/1994 must be met in all cases.

  • Article 27.4.B: Creation of jobs directly related to the investments provided for in letter A), which occur within a period of six months from the date of entry into operation of said investment and meet certain requirements for increasing staff.

  • Article 27.4.B bis: Creation of jobs carried out in the tax period that cannot be considered as an initial investment for not meeting any of the requirements established in letter B of article 27, with a limit of 50% of the allocations to the Reserve made by the taxpayer in the tax period.

  • 27.4.C: Acquisition of tangible or intangible fixed assets that cannot be considered as initial investment due to not meeting any of the conditions established in letter A) above, as well as investment in assets that contribute to the improvement and protection of the environment in the Canary Islands, as well as those research and development expenses that are determined by regulation.

    In no case may the reserve for investments in the Canary Islands be used for the acquisition of properties intended for housing for tourist purposes.

  • Article 27.4.D: The subscription of the following securities:

    1. Shares or interests in the capital issued by companies as a result of their incorporation or capital increase that carry out their activity in the archipelago, provided that the requirements established in the aforementioned legal provision are met.

    2. Shares or interests in the capital issued by entities in the Canary Islands Special Zone as a result of their incorporation or capital increase, provided that the legally established requirements and conditions are met.

    3. Any financial instrument issued by financial institutions provided that the funds raised for the purpose of materializing the Reserve are intended for the financing of private projects in the Canary Islands, whose investments are suitable in accordance with the regulations in this article, provided that the issues are supervised by the Government of the Canary Islands, and have a binding report from the State Tax Administration Agency.

    4. Public debt securities of the Autonomous Community of the Canary Islands, of the Canary Islands Local Corporations or of their public companies or autonomous bodies, provided that they are intended to finance investments in infrastructure and equipment or in the improvement and protection of the environment in the Canary Islands, with a limit of 50% of the provisions made in each financial year.

    5. Securities issued by public bodies that carry out the construction or operation of infrastructure or equipment of public interest for public administrations in the Canary Islands, when the financing obtained from said issue is exclusively intended for such construction or operation, with a limit of 50% of the provisions made in each financial year.

    6. Securities issued by entities that carry out the construction or operation of infrastructure or equipment of public interest for public administrations in the Canary Islands, once the corresponding administrative concession or administrative title of inhabitant has been obtained, when the financing obtained with said issue is exclusively destined to such construction or operation, with a limit of 50% of the provisions made in each financial year and in the terms provided for by regulation. The issuance of the corresponding securities will be subject to prior administrative authorization by the competent Administration for the granting of the corresponding administrative title of inhabitant.

Note: Please note that sections 2, 4.A) and C), 5, 8 and 12 of article 27 of Law 19/1994, of July 6, were modified, for tax periods beginning on or after November 7, 2018, by article one.Thirty-four of Law 8/2018, of November 5, which modifies Law 19/1994, of July 6, modifying the Economic and Fiscal Regime of the Canary Islands ( BOE of 20).