DEC - Deductions for Investment in the Canary Islands

DEC - Deductions for Investment in the Canary Islands

The DIC is a decrease in tax and is applied to the tax due resulting from net income, and is therefore a tax deduction.

The DIC - Canary Islands Investment Deduction is compatible with other tax incentives under the Canary Islands Economic and Fiscal Regime:

Bonus for the production of tangible goods and
Reserve for investment in the Canary Islands with exceptions.

Beneficiaries are companies and legal entities subject to corporate tax domiciled in the Canary Islands or otherwise having a permanent establishment in the Canary Islands.

In addition, the benefit is granted to sole proprietorships and professionals operating in the Canary Islands, subject to the Canary Islands Economic and Tax Regime.

The DIC is a deduction of 25 percent of the amount of quota investments, up to the limit of 50 percent of them, from the corresponding tax, minus the amount of deductions for double taxation and deductions.

FUNDAMENTALS OF DIC

The deduction for investments in new fixed assets in the Canary Islands is covered by Article 94 of Law 20/1991, of June 7, as amended by Law 8/2018, of November 5, and consists of applying the 25% type of deduction of the amount of the investments made (purchase price or production cost) with a limit of 50% of the entire amount, less the amount of double taxation deductions and premiums.

Thus, it takes the form of an incentive to lower the tax burden by allowing a percentage of the amounts invested in new fixed assets to be deducted from the tax share.

The deduction can be applied in the year the asset is made available or in the following 15 years.

For this, investments must be made in new fixed assets related to an economic activity and must remain in operation for 5 years or during their useful life, whichever is shorter, excluding land.

In turn, it is also allowed to apply the deduction on used real estate that meets certain conditions.

Investments made under leasing arrangements will also be eligible for this deduction, with the exception of buildings.