Juan Luis Alayón García, Executive Director of Confijulab, SL and President of the Association of Tax Advisors of the Canary islands, has appeared in the newspaper The Province, and The Day to respond to the following questions on the Economic and Fiscal Regime:
During the period of application of the rules of REF businesses canary and permanent establishments have saved a significant amount of money in taxes. What is justified by the savings?
First of all, we have to indicate that the REF is an instrument that has been recognized by the inhabitants of the islands from the time of the Catholic Monarchs, which established the first tax exemptions and in 1852 was adopted the law on Ports of Bravo Murillo incorporating franchise tax on the importation of products. That is to say, it is not a new figure, but that has been recognized for many centuries by the State.
In addition, this instrument is recognized and guaranteed in the Constitution and in the Statute of Autonomy and the Treaty on the Functioning of the European Union.
Of course, this is justified, since the explanatory memorandum of the Law no. 19/1994 expresses with clarity: “the possibility that the entrepreneurs of the canary islands be able to access dimensions important tax savings as a counterpart to its investments from its own resources.” It is not that the employer canario stop paying tax and give these benefits, but this requires a consideration; and it is to invest in fixed assets or employment-creation, and thus their maintenance, tax bases that have been left to be taxed under the law. In summary, to create an economy in the archipelago. It is more that savings has meant a level of investment and job creation of 20,000 million euros approximately.
Do you have served these tax incentives for the redistribution of income in the Canary islands? Do you have fostered a sufficient job creation?
In its beginning, it may be that the creation of employment with the Reserve for Investments in the Canary islands has not been important enough. However, from the year 2015 are becoming more and more entrepreneurs are betting on the materialization of the Reservation in employment creation and maintenance of the same, according to the regulations in force.
If we look at the growth rates of the economy canaria since 1994, will be able to check -without any doubt - that the tax incentives of the REF have served for a sustainable growth of the economy, making it more competitive.
What would change the conditions for benefiting from and implement the Reserve for Investments in the Canary islands?
In principle, the provision of care to the Reserve for Investments in the Canary islands I would not change, even if it might be necessary between the various economic operators (Management, entrepreneurs, investors, professionals,...) studies are conducted and proposed for the realization of the Reserve for Investments in the Canary islands and the deduction for Investments in the Canary islands. By way of example, could materialize in infrastructure private as well as public so necessary in the islands through the appropriate mechanisms to ensure that the commission of such investments with due legal security to which such investments are attractive to employers as well as investors.
What is justified the tax benefit on the sale of personal property?
Article 26 of the Law no. 19/1994 regulates the special regime of the companies producing personal property in the Canary Islands, and provides a tax reduction of 50% in the share of both the corporate income Tax (IS) as the Tax on the Income of Natural Persons (personal income TAX), depending on the case, the income derived from the sale of goods of agriculture, livestock and industry.
This incentive to the production has also been a source of litigation primarily in agriculture in terms of the income to be taken into account when calculating the bonus. These interpretations have been resolved by the courts recently in favour of agricultural producers.
As mentioned in the article, the bonus will be applied to the agriculture, livestock and industry as required in the archipelago to diversify our activities and not be so dependent on tourism sector.
In our opinion, as a member of the tax incentives of the REF we consider that the production bonus of the personal property is more than justified in the Canary islands.
Now is posing at the international level a minimum rate of 15% in the corporate tax in all over the world. Do not hit this with the tax incentives canaries?
In the case that you enter in the provisions of the income Tax of a minimum rate without account by the legislator to the measures provided for in the REF would be a blatant modification of the exceptions allowed under the current legal framework in the REF. These limitations and exceptions, you will have to continue to hold even if the introduction of the minimum rate.
And all this, we say, because The Spanish Constitution, the Statute of Autonomy of the Canary islands, the Law 20/1991 of 7 June, the Law no. 19/1994 of the Economic and Fiscal Regime of Canarias registered in your content to the existence for the Autonomous Community of the Canary islands from a tax regime that is found to be affected by their remoteness, insularity, structural constraints permanent, and its status of outermost region of the European Union. Therefore, it is established in the legislation in force a differentiation tax that should be significant with respect to the average of the rest of the national territory.
What do you think of the latest controversies in terms of the support film productions?
Therefore it seems that it is very easy to modify the REF unilaterally and without the consent or communication to the canaries. However, we take any positive reading as it is the pooling of all political forces in the defenses of our own and what we have been legally recognized.
Why has the print in different environments outside the canary islands that the SAC is a kind of fiscal dumping in respect to other autonomous communities and even in relation to other countries? People say that there are sites recognized as tax havens that offer a few types similar tax.
The Special Area of the Canary islands, is an incentive that belongs to the REF and that is configured as an area of low taxation which aim to promote social and economic development of the Archipelago and to diversify its production structure.
To enter form part of the ZEC will have to meet a number of requirements of investment and job creation for the benefit of the reduction of tax rates and in addition to the activities that you can accommodate the SACS are located within the listing of the permissible in its scope.
In that sense we do not consider it for nothing that the ZEC is a fiscal dumping because it is recognized and because the arguments for creation has been reviewed and recognized both from the Spanish State, as well as from the European Union, and everything under the criteria that are clearly explained in the REF of the Canary islands.
Likewise, I might ask if a known tax haven, with the unemployment rate (25% in 2020) of the highest in Spain and with a per capita income of the lowest in the country.
By way of conclusion as to the REF would put a paste important and we have to sing the " mea culpa, and is that from the Archipelago have not been able to explain our jurisdiction in the rest of the national territory. You will understand the whys of this special regime of taxation and economic benefits. It is a work for which we are responsible to all the inhabitants of the islands are related to the economy, and taxation, and the government of the Autonomous Community. In this sense, the Association of Tax Advisors of the Canary islands has created from this year, a prize dedicated to the taxation in the scope of the Autonomous Community of the Canary islands and in addition, we have planned a series of activities that we intend to put in place for our ECONOMIC AND FISCAL REGIME is once and for all well-known and will not continue to stigmatize every two by three. There is No other jurisdiction to tax, and there are several within Spain which is derogatory as much as the REF of the Canary islands.