THE TREASURY DEPARTMENT WILL EXCLUDE THE CANARY ISLANDS FROM THE MINIMUM CORPORATE TAX RATE

In a year end that is full of changes from a legislative point of view, the debate about the State General Budgets for 2022 focuses all the news on the economic matters.

On October 13, 2021, the State General Budget Project for 2022 was presented to the Parliament.

Within the set of novelties and modifications that are incorporated in the Draft Law on State General Budgets for fiscal year 2022, the establishment of a minimum rate of 15% in the Corporate Tax, which will be applicable to groups, is particularly relevant. It will be applicable to fiscal consolidation’ groups, as well as to entities whose operating volume exceeds more than 20 million euros.

As it has been published in various media, the Treasury Department has announced that the application of the minimum tax rate of 15% in Corporate Tax will not be applicable to those commercial entities established in the territory of the Canary Islands, in order to prevent this tax measure from damaging the fiscal singularities of the Canary Islands.

If this measure is carried out, and while the terms of its implementation are still pending, the consolidation of the specialties in tax matters typical of the Canary Islands, benefiting the realization of investments, and the conjunction of the REF’s own incentives with the rest of the Tax incentives applicable throughout the national territory, with special incidence in booming sectors such as the audiovisual and cinematographic sector, as well as the sector of new research and innovation technologies.

There is no doubt that the special and specific treatment that the institutions owe to the territory of the Canary Islands is a historical demand, in order to respect its singularities and remoteness, in addition to serving as an impetus for the improvement of the economy of the islands, attracting new productive investments to the island territory.

We cannot forget that the Canary Islands have a series of unique and exceptional instruments, all of them protected and recognized by the European Union and whose needs to optimize, protect and enhance we continue promoting.

The tax incentives derived from the Economic and Fiscal Regime of the Canary Islands (REF) due to their depth in the business fabric of the archipelago, merit their urgent adaptation to current circumstances, ensuring their survival, guaranteeing their application and future interpretation, providing them with maximum security and reinforcing their uniqueness as exceptional mechanisms for the reactivation, diversification and maintenance of economic activity in the archipelago.

We will have to wait for the final drafting of the normative text after the parliamentary debate to know its practical scope.

Danaizeth

Danaizeth Gómez

Tax Lawyer at CABRERA RODRIGUEZ ETL Global