What is the RIC zone?
It is a tax incentive to stimulate business investment in the Canary Islands through own resources, that is, the self-financing of companies that develop their activity in the Canary Islands.
La Ric is regulated in article 27 of Law 19/1994, of July, on the modification of the Canary Islands Economic and Fiscal Regime, having as a background the figure of the investment fund and the transitory regime established by Law 20/1991 .
What is intended with this tax incentive is a significant reduction in corporate taxes or income tax on natural persons.
With this incentive, companies can reduce their tax base each period by having a limit set at 90% of undistributed profits. Distributed benefit is understood as the one applied to the legal reserve, which corresponds to the increases in equity effects to the exemption for reinvestment (regulated in article 15.8 of Law 61/1978, of December 27, on Corporation Tax).
Where can the RIC be invested?
The objective of the RIC is to stimulate the reinvestment of business benefits in the same economic zone, so one of the basic requirements of the RIC is that the investment of tax savings is affected in the same area in which it has been generated, taking as a valid area for its materialization any of the seven islands of the Canary archipelago.
Who can use the RIC?
The reserve for investments in the Canary Islands (RIC) is applicable to legal entities subject to IS, which have establishments in the Canary Islands, as well as to individuals who determine their net income by direct estimation, provided that they come from economic activities carried out through establishments located in the Archipelago, and keep their accounts in accordance with the Commercial Code.
The RIC can also enjoy individuals and entities not resident in Spanish territory that operate in the Canary Islands through permanent establishment, for the income obtained through them, and through the corresponding reduction in the tax base of the IRNR.
How can we reinvest the money?
This point is one of the most important since the reserves that we endow must allocate fixed assets regardless of whether they are new or used.
- Creation of an establishment: Reinvestment for the first time to open an establishment where an economic activity must be carried out.
- Investment in property assets of property, plant and equipment: In this case, investments are included to create a new establishment, or to grow an existing one. Suitable assets are new assets, except in the case of small companies (Figure of business less than 10 million euros) where if it is allowed to invest in used assets. The real estate destined for the development of the industrial activities of the company, must be necessary for the purpose that were acquired and for exclusive use.
- Extension of establishment: We can provide Ric in this case provided there is an increase in the total value of its assets. Vehicles acquired as a result of the investment, should be used exclusively for the activities of the employer or company without being able to use Third-party transport, that is, the vehicle must have certain characteristics depending on the activity to be carried out.
- Creation of jobs: At this point two issues must be taken into account, 1st must have a direct relationship with investments and 2nd a temporary component as they must be created within six months having as start period the operational date of the investment.The increase in the total average workforce will take into account the previous 12 months, maintaining a period of 5 years or 3 years for SMEs, for the calculation of the complete workforce the total average of the company is observed and its increase always in full-time hiring. The materialization occurs during the first two years since the increase in the workforce, calculating the average amounts of gross wages and social contributions, pay close attention to the limitations of 36,000 euros per worker in addition to the jobs that are limited to Tenerife and Gran Canaria 5 jobs and other islands to 3 jobs.
- Patrimonial elements that do not constitute initial investment: In this point all those assets that meet the requirements to qualify for the Ric are framed but not within the consideration of initial investment, would be those assets that will be used for the development and increased activity of the company or entrepreneur but who do not carry an extension, creation of new products, etc.
- Subscriptions of shares or participations in companies for the constitution or increase of capital and Canarian public debt.
OTHER INVESTMENTS IN WHICH THE RIC CAN BE MATERIALIZED
The RIC may materialize in other investments such as:
- Investments that contribute to the improvement and protection of the Canarian environment.
- Research and development expenses.
- Transportation elements.
- Materialization of the amounts allocated to the reserve for investments through the subscription of shares of entities of the Canary Islands Special Zone.
- Materialization of the amounts allocated to the reserve for investments through the subscription of financial instruments.
- Investments in debt securities issued by private entities.
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