The bill would create a tax-advantaged investment reserve for the Balearic Islands

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1. The bill would create an investment reserve: companies could reduce their taxable base under the Corporate Income Taxincome tax The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings. with amounts they allocate from profits to that reserve, if the profits come from establishments located in the Balearic Islands.
2. The reduction would apply to contributions to the reserve up to a limit of 75% of undistributed profits obtained in the period by establishments in the Balearic Islands, and it could never make the taxable base negative.
3. The reserve would have to be used within a maximum of three years for investments such as creating or expanding an establishment, creating jobs, or investments that improve and protect the environment in the Balearic territory. The assets would have to stay in operation in the company for at least five years (ten years for land).
4. Self-employed people and professionals who pay personal income tax (IRPF) under the direct estimation method would get a deduction in their tax bill, calculated at the average tax rate and capped at 65% of the portion of the bill corresponding to those earnings.
5. The tax benefit would only apply within European Union state aid limits and would be subject to a monitoring system: beneficiaries would file an information return, and exceeding the aid accumulation limits would be penalized with a fine of 20% of the excess.
6. The bill sets penalties for breaches such as failing to record the reserve in the accounts or providing false data in the annual report (fines of 2% or 100 euros per item, with a 1,000-euro minimum), and anyone who breaks the requirements would have to add the amounts back to their taxable base or tax bill.

Who it affects

• Companies paying Corporate Income Tax with establishments in the Balearic Islands: They could reduce their taxable base if they allocate undistributed profits to the reserve and meet the investment and holding requirements.
• Entities paying the Non-Resident Income Tax: They would have the same right to the reduction for their establishments in the Balearic Islands.
• Self-employed people and professionals filing under personal income tax (IRPF) using direct estimation: They could apply a deduction in their tax bill for earnings allocated to the reserve.
• Companies receiving other aid or tax benefits: They could not combine the benefit with other aid above European Union limits and would have to file a monitoring information return.

Words worth knowing

Base imponible (taxable base)

The amount of money on which the tax is calculated, before applying the rate that determines how much is paid.

Cuota íntegra (gross tax liability)

The amount of tax before deductions or withholdings are applied.

Estimación directa (direct estimation)

A method of filing personal income tax in which actual income and expenses of the activity are calculated, instead of using fixed percentages.

Arrendamiento financiero (finance lease)

A lease with a purchase option: a periodic payment is made to use an asset, and it can be bought at the end.

Ayudas de minimis (de minimis aid)

Small public aid that, because of its low amount, does not require notification to the European Union.

income tax

The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings.

It summarizes the text as it was introduced. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries