Deduction for investments in Canary Islands (DICI): a powerful tax incentive

Mar 8, 2021 | Lagares News

DICI is an attractive tax incentive, compatible with other tax incentives you may find in the Canary Islands’ Economic and Tax Regime (REF), including the bonus for the production of tangible assets (BPBC) together with the well-known Reserve for Investments in the Canary Islands (RIC).

DICI, which is set out by section 94 of Act 20/1191, of 7 June, and amended by Act 8/2018, of 5 November, is a notable tax incentive that significantly reduces the tax invoice by allowing a certain percentage of the tax quota (IS or IRPF) to be deducted from the amounts invested in fixed assets, whether new or used. This shall happen provided that, the latter have not enjoyed this deduction already, it involves an obvious technological improvement for the investor, and are found in the category of machinery, facilities and tools, data and information processing equipment and transport elements.

Leasing investments, excluding those of real estate, are also eligible to benefit from the DICI.

In the same way, investments in the acquisition of land are expressly excluded from DICI.

The DICI holds a deduction of 25% of the amount of the investment in the final quota, but limited to 50% of the corresponding tax.

When investments are made in in the western islands of La Gomera, La Palma and El Hierro, both the deduction and the limit of the general quota are even higher.

DICI can be applied from the year the acquired asset begins activity and for the following 15 years.

Assets must remain in operation for 5 years or for their useful life, should this be lower than 5 years.

Companies and other legal entities which hold a registered office or a permanent commercial establishment in the territory of the Autonomous Region of the Canary Islands may benefit from the DICI, provided they are subject to corporation tax (IS) for those investments taking place and remaining in the Canarian archipelago.

Furthermore, natural persons engaged in business or professional activities taking place in the territory of the Autonomous Region of the Canary Islands may also benefit from the DICI under the terms laid down in the Personal Income Tax (IRPF) for the application of the investment incentives expected in Corporate Tax.

Ernesto Falcón
Partner. Litigation Department