The Canary Islands Investment Reserve (RIC) is one of the most powerful fiscal incentives in the Spanish tax system. It allows Canarian companies to reduce their corporation tax base by up to 90% of undistributed profits, provided those amounts are invested in the Canary Islands.
A company with €200,000 net profit can allocate €180,000 (90%) to the RIC and pay tax on only €20,000. The tax saving compared to the general regime can exceed €40,000 per year.
The RIC is regulated in Article 27 of Law 19/1994. It is an accounting allocation that companies can make against undistributed profits, directly reducing the corporation tax base in the year of allocation. The RIC is approved by the EU as State aid compatible with the Treaty.
In the year profits are earned, the company can allocate up to 90% of undistributed profits to the RIC, reducing the IS taxable base immediately.
Allocated amounts must be invested within 3 years from the end of the financial year in which the reserve was allocated.
Assets must remain in the company's assets for at least 5 years (3 years for fungible goods).
The RIC is compatible with other Canary Islands REF incentives. Combined with the ZEC (4% IS rate) and the Investment Deduction (DIC), the effective tax rate can be reduced to near zero for companies that invest significantly in the Canary Islands.
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