Endowment

Regulation: Article 27.2 Law 19/1994

The reduction will be applied to the allocations made in each tax period to the RIC up to the limit of 90 percent 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 Canary Islands.

In no case may the application of the reduction determine that the tax base is negative.

The allocations to the reserve for investments from profits from tax periods beginning before January 1, 2015, will be regulated by the provisions of article 27 of Law 19/1994, of July 6, as amended as of December 31, 2014.

For these purposes, profits from permanent establishments in the Canary Islands will be considered as profits derived from operations carried out with personal and material means assigned to it that close a business cycle that determines economic results, as well as those derived from the transfer of assets not assigned to economic activities, provided that, in the latter case, they are elements of tangible fixed assets, real estate investments or intangible assets that have generated income for at least one year within the three prior to the date of transfer.

Undistributed profits will be considered as those intended to feed the reserves, excluding those of a legal nature.

Undistributed profit will not be considered that which derives from securities representing participation in the capital or equity of other entities, as well as the transfer of equity to third parties, except in the case of entities that provide financial services.

With effect for tax periods beginning on or after November 7, 2018, will not be considered as undistributed profit , the profit derived from the transfer of assets whose acquisition would have determined the materialization of the investment reserve endowed with profits from tax periods starting on or after January 1, 2007.

In the case of assets that have only been partially allocated to the materialization of the reserve as of January 1, 2007 , the proportional part thereof that corresponds to the acquisition value that would not have resulted in the materialization of said reserve will be considered undistributed profit.

The allocations to reserves will be considered reduced by the amount that would have been eventually deducted from the equity, either in the year to which the reduction of the tax base refers, or in the year in which the agreement to make the aforementioned allocations was adopted.