Reserve for Investments in the Canary Islands – Complete Guide to Tax Incentives
What Is the Reserve for Investments in the Canary Islands?
The Reserve for Investments in the Canary Islands (RIC) is a tax incentive designed to help companies and individuals operating in the Canary Islands reinvest profits efficiently. The Reserve for Investments in the Canary Islands allows you to benefit from significant tax reductions if you meet specific requirements.
This incentive applies to legal entities subject to Corporate Tax (IS) that have establishments in the Canary Islands.
In addition, individuals who calculate their net income using the direct estimation method can also benefit. However, they must meet two conditions:
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The income must come from economic activities carried out through establishments located in the Archipelago.
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Accounting records must follow the Commercial Code.
Furthermore, individuals and entities not residing in Spain can also take advantage of the Reserve for Investments in the Canary Islands. They must operate through a permanent establishment, and in these cases, the reduction applies to the Non-Resident Income Tax (IRNR) base related to the income obtained.
How to Reinvest the Reserve for Investments in the Canary Islands
This section is especially relevant. The reserves you set aside must be allocated to investments in fixed assets, whether they are new or used.
Below you will find the main options for reinvesting the Reserve for Investments in the Canary Islands:
Creation of a New Establishment
It is possible to reinvest the Reserve for Investments in the Canary Islands to open an establishment for the first time. The new establishment must develop an economic activity.
Investment in Property, Plant, and Equipment
This option includes investments to create a new establishment or expand an existing one.
Generally, the assets must be new. However, if your company qualifies as a small enterprise (with turnover below 10 million euros), it is also possible to invest in used assets.
Moreover, real estate intended for industrial activities must be necessary for the purpose for which it was acquired and must be used exclusively for that purpose.
Expansion of an Existing Establishment
You can allocate the Reserve for Investments in the Canary Islands if there is an increase in the total value of your company’s assets.
Vehicles acquired as part of this investment must be used exclusively for business activities. Therefore, they cannot be used for transporting third parties. In addition, the vehicles must meet certain specifications depending on the activity performed.
Job Creation Linked to the Reserve
Two key aspects must be considered regarding job creation:
First, the jobs created must be directly linked to the investment. Second, they must be created within six months from the date the investment becomes operational.
Furthermore, the increase in the average total workforce must be maintained for five years (or three years for small companies). The calculation is based on the average workforce during the twelve months prior to the investment, considering only full-time contracts.
During the first two years, the Reserve for Investments in the Canary Islands is materialized by calculating the average gross salaries and social contributions. However, there is a limit of €36,000 per employee. Moreover, a minimum of five jobs must be created in Tenerife and Gran Canaria, and three jobs in the other islands.
Other Tangible Assets
This category includes assets that meet the requirements to qualify for the Reserve for Investments in the Canary Islands but are not considered initial investments. These assets help develop or increase the business activity without necessarily involving expansion or creating new products.
It is also possible to reinvest the Reserve for Investments in the Canary Islands in:
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The subscription of shares or participations in companies for their incorporation or capital increase.
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The subscription of Canary Islands public debt.
Other Investments Where the Reserve for Investments in the Canary Islands Can Be Materialized
In addition to the options above, the Reserve can be allocated to:
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Investments that contribute to improving and protecting the environment in the Canary Islands.
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Research and development (R&D) expenses.
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The acquisition of transport equipment.
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Subscriptions of shares in entities belonging to the Canary Islands Special Zone.
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Subscriptions of financial instruments.
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Investments in debt securities issued by private entities.
Learn More About the Reserve for Investments in the Canary Islands
If you want to discover additional tax incentives, visit our guide to tax benefits in Spain for more information.
Contact us to receive personalized advice and learn how to make the most of the Reserve for Investments in the Canary Islands.
